Will Job Termination Become Less Painful Under the New Labour Codes?
India’s labour landscape is expected to undergo a structural transition as the new labour codes—once implemented—introduce key provisions aimed at reducing the financial and emotional burden on employees affected by layoffs or retrenchment. A major highlight of these reforms is the introduction of a reskilling fund alongside existing retrenchment compensation requirements.
For decades, termination—especially in the private sector—has often been abrupt, financially stressful, and without a structured support system. The new framework aims to change that by making employee-offboarding more humane, regulated, and transition-friendly.
What Changes Under the New Rules?
Employers will now be required to provide two support elements to terminated employees:
- Mandatory retrenchment compensation
- Transfer of a reskilling fund equivalent to a portion of the last drawn salary
The reskilling fund will be credited directly to the employee within a stipulated timeline—typically within 45 days—helping them upskill or transition to new opportunities more effectively.
Why This Matters
With automation, AI adoption, business restructuring and startup volatility increasing, job security dynamics are shifting. While termination may still occur, the new codes aim to protect workers from sudden financial shock and skill redundancy.
Instead of leaving employees without direction, the system encourages career continuity via retraining support—something global labour policies in developed economies have followed for years.
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How Employers May Respond
Large corporates and organised-sector companies may adapt quickly due to established HR frameworks. However, medium and growing enterprises may need time to adjust to the added financial and compliance components.
This change may also encourage better workforce planning, stronger probation clarity, and structured offboarding processes across industries.
Is This a Win for Employees?
Yes, in many ways. While job loss can never be fully painless, financial cushioning paired with reskilling support gives affected employees a more secure, dignified transition and a chance to re-enter the workforce with improved capability.
The broader vision is clear: shift the labour system from termination shock to transition support.
Investor Takeaway
Labour reforms often signal deeper structural changes in the economy. As India improves regulatory confidence and labour security, it may boost formal employment, corporate compliance, and investor sentiment. Sectors like HR tech, EdTech, staffing, and enterprise compliance tools may benefit from this shift.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
