Items Description of Module

Subject Name Management

Paper Name Human Resource Management
Module Title Separation
Module ID Module 27
Pre-Requisites Understanding the nature of Separation
Objectives To study the types, process and components of employee
separation
Keywords Separation, Voluntary, Involuntary, Lay off, Resignation,
 QUADRANT –I

1. Module : Separation
2. Learning Outcome
3. Introduction
4. Types of Separation
5. Reasons for Separation
6. Process of Separation
7. Components of Separation

1. Module 27 : Separation

2. Learning outcome
After studying this module, you shall be able to
 Know the concept of separation
 Understand the types of separation
 Comprehend the reasons for separation
 Become aware of the process of separation
 Know the components of separation

3. Introduction
Separation of employees is another significant career transition. Employees may leave
the organization involuntarily, through layoff or discharge, or voluntarily, through
resignation or retirement. Although the reasons for separation vary, each instance
should be analyzed and understood in terms of its impact on the individual employee
and on the organization as a whole. Sudden or unexpected removal from the
organization can be particularly difficult for the affected employee and can damage the
morale of coworkers and the organization’s general climate. Even when the employee
initiates the separation, the organization must be able to continue functioning until the
vacancy is filled. Thus, the effective management of employee separations is vital to the
healthy and continued functioning of the organization.

4. Types of Separation
There are different types of employee separation. The important ones are shown
in Fig.1.
4.1 Layoff
A layoff is the temporary or indefinite removal of employees from the payroll. Generally,
the purpose of layoff is to reduce the organization’s burden of excess labor cost when
human resources cannot be used effectively. Layoffs may affect relatively small groups
of employees, but when a large organization run into serious financial problems, large
number of workers may be laid off. In some instances, management is too quick to lay
off employees because of financial downturns., thus depleting the organization’s
valuable human resources for the long term and damaging the morale and security of
retained employees., Furthermore, contrary to the views of many investors, layoffs
frequently do not lead to improved profits and stock prices over a subsequent three year
period. In some instances, however layoffs may be the only option remaining for an
organization facing profitable bankruptcy.
Although recent years have been witness to white-collar and supervisory employee
layoffs, time paid workers are usually the first to be affected by production cutbacks.
Some organizations provide accrued vacation pay, supplemental unemployment
benefits, and continued health and life insurance to employees affected by a layoff,
especially if the layoff is expected to be temporary. SUB clause in labor contracts, which
provide for company payments to laid-off workers, are designed to extend or enlarge the
unemployment benefit payments provided under state law. Severance pay usually, a
lump-sum payment at the time of permanent separation, is more common for
nonunionized salaried workers than for unionized production and maintenance workers.
At the top executive level, severance pay has been labeled the golden parachute.
Severance arrangements for some CEOs displaced by acquisition or merger have,
indeed, been golden. Fr example, the CEO of Revlon, Inc. was paid $34 million when
the cosmetics and health care company was acquired by Pantry Pride.
In a unionized organization, the labor contract governs the order of layoff and method of
recall, or rehiring of laid off employees. Seniority is usually the controlling factor: often
the most senior employee is laid off last and is the first to be recalled. In such cases, the
layoff is based on reverse seniority. In addition, the contract typically establishes the
maximum period during which a layoff employee has recall and other rights. Bumping
provisions permit employees with greater seniority to accept a demotion and to replace
less senior employees who are laid off. Bumping can work effectively only when the
more senior employee is qualified and able to perform the work of the less senior
employee.
The use of inverse seniority in layoff situations is gaining some support as a way out of
the dilemma between reverse seniority and affirmative action. Under the concept of
inverse seniority, the most senior workers are given the first opportunity to elect layoff.
 Volunteers may be motivated by such interests as traveling, remodeling the house, or
simply desire for a change of pace. Those who volunteer are provided with
unemployment compensation plus supplemental unemployment benefits. The success
of inverse seniority plans depends on the company’s SUB program and on the particular
state concurring in the legality of paying unemployment compensation to such workers.

4.2 Discharge
Discharge or dismissal, termination or firing is a management action in which an
employee is separated from the organization for violation of company rules or
inadequate performance. Because discharge is a traumatic experience for the affected
employee, and usually for others as well, most managers are extremely reluctant to
dismiss an employee unless there are substantial and well-documented reasons for
such action. In many cases, timely warnings and effective supervisory involvement in
correcting problems can eliminate the need for employee termination. Dismissal is
termination of service of an employee as a measure of inflicting punishment. This may
happen either on account of inadequate performance or acts of misconduct. Persistent
inability on the part of employee to perform up to the expectation or specific standard is
considered as performance short of standards. If the employee willingly violates rules
and of rules and regulation by the employee is treated as misconduct. Dismissal is a
drastic step seriously imparting the earnings and image of the employee.
Therefore, dismissal as a measure should be resorted to with great care and caution. It
must be justified that duly support by the just and sufficient cause. Before an employee
is dismissed, he must be service advance notice to explain his position. The reasons for
dismissal must be known to the employee.
An employer has the right to fire or lay off employees for legal business reasons,
irrespective of whether they are members of reserved categories. Therefore, all
employees can be fired for poor productivity, low quality of work, poor observance of
safety norms, refusal to work, unexcused absences, incapability to perform work, and
violation of well defined company policies.

.
4.3 Resignation

Resignation or termination of service by an employee by serving a notice is called

‘resignation’ on the employer. Resignation may be voluntary or involuntary. A voluntary
resignation is when an employee himself decides to resign on the grounds of ill health,
marriage, better job prospects in other organizations, etc.
When the employer asks the employee to resign on grounds of negligence duty and
indiscipline or face the disciplinary action, resignation is known as involuntary or
compulsory. However, in case of involuntary resignation a domestic enquiry is required
to be conducted prior to asking the employee to submit resignation. Otherwise the
inflicted employee is free to go to the trade union or take legal action and make complain
that he was asked to resign using illegal force or threat.
While some resignations may be advisable and beneficial for the organization to rectify
the mistakes committed in hiring the employees, excessive turnover may be alarming as
well. In such cases, it is appropriate for the organization to trace out the reasons behind
resignations by conducting exit interviews with the employees who are leaving the
organization.
Most organizations use exit interviews to obtain information about the reasons of
turnover. Often, a representative of the HR department conducts the interview who
attempts to determine why the employee is exiting the organization. The exit interviews
 also make certain that the company property has been checked in and that the
employee knows the nature of various benefit programs.
Sometimes instead of exit interview companies in order to ask employees reasons for
their resignations, use postemployment surveys. They assume that the data obtained a
few weeks later would be more valid than the data obtained at the time of employee
departure. In all cases, the supervisors have to defend any critique of the employees’
performance. The HR department will have to use the data in constructive and non-
punitive manner.

4.4 Retirement
Retirement is the major cause of separation of employees from the organization. It can
be defined as the termination of service of an employee on reaching the age of
superannuation. For example, at present Central Universities provides for the
superannuation age for the teachers as 62 years of age and in some state governments
the age of retirement is 58 years. Some people characterize retirement as ‘role less
role’.

4.4.1 Compulsory Retirement:

When employees are bound to retire compulsorily from service on attaining the age of
superannuation, it is called compulsory retirement Certain organizations like University
may have a policy of reappointment professionals and others who possess rate skills
and expertise for a limited time even after attaining superannuation.

4.4.2 Voluntary Retirement:

When organizations offer options to its employees to retire even before the exact time of
superannuation, it is called voluntary retirement. Recently, in order to downsize the
workforce, organizations attempt to encourage their employees to enable them to opt for
voluntary retirement provide for certain incentives. Employees in return of voluntary
retirement receive a certain lump sum payment. This kind of retirement is also known as
‘Golden Hand Shake’
Retirement from service is a significant landmark in the life of an employee. Retired
employees require a great deal of adjustment during their retired life. Here, organization
has a major role in facilitating smooth transition from job state to jobless stage.
Against this background, some organizations like Citi Bank and Bank of America
organize counseling sessions and also offer investment related services. Some
organizations also extent medical insurance benefits to the retirees.

4.5 Retrenchment
Retrenchment means permanent termination of an employee’s services for economic
reasons. The existence of surplus staff, poor demand for products, general economic
slowdown, etc. are the major reasons for employee retrench However, the retirement,
wind up of a business, illness or on disciplinary action are not included in retrenchment.
Retrenchment is mainly noticed in such industries as plantations, services related to
agriculture, industries related to forests, food products, machinery manufacturing and
cotton textile. Financial stringency and lack of demand for their products were the
reasons found behind retrenchment.
The Industrial Disputes Act, 1947 makes it mandatory for organizations employing 100
or more employees give a notice of months to the employee to be retrenched and also
get prior approval of the Government.
In other organizations, employee must be served one month’s notice in writing indicating
the reasons for retrenchment and is paid compensation 15 days’ wages for every
 completed year of service. As and when there is need for employing people in future, the
retrenched employee get preference.

4.6 Outplacement
Employees who are retrenched /laid off may have difficulty in finding an alternative job if
the market conditions are not favorable. There might be a need for specific category of
employees having multiple skills, but the retrenched employees may possess those
skills. To fill this gap, some organizations provide training in marketable skills and assist
the retrenched employees in searching a suitable job in other organizations.
Outplacement assistance includes efforts made by employer to help a recently
separated worker find a job. Apart from training, some firms doing business in multiple
country offer assistance to separated employees in the form of paid leave, travel
charges for attending interviews, search firm changes, waiving bond requirements to the
retrenched employees. Bank of American has given a fat sum as liberal retrench
compensation running into several lakhs of rupees to all eligible retrenched officers in
1998. It has also held counseling sessions to those officers on issues such as how to
repay their car/house loans, where to invest their money, etc. Search firms were also
hired to find suitable employment. When the downsizing effort stabilized, Bank of
America has even extended the former employees’ a warm welcome back home. Such
outplacement assistance, in whatever form it is available, assures the remaining
employees management commitment towards their welfare if a further downsizing takes
place.

5. Reasons for Employment Separation

The time may come during the career of a business owner where he faces the unwilling
task of terminating an employee. Unacceptable performance or behavior exhibited by
the employee, or as a result of a change in business conditions may include the reasons
for employee separation. Irrespective of the reason for the employee termination, careful
documentation on the part of the employer will protect him against probable charges of
discrimination or illegal termination resulting in a lawsuit. The important reasons are
shown in Fig.2.
5.1 Inadequate Job Performance
An employer may require an employee to go because he/she is unable to perform the
necessary aspects of the job. Prior to firing an employee, the employer must point out
his/her deficiencies during a performance appraisal and is provided counseling to enable
him/her to improve. If no improvement is visible, an employee may be considered for
movement to a more suitable position, if possible.

5.2 Business Conditions

Unfavorable business conditions may compel an employer to lay off employees for
economic reasons. The layoff may be permanent, or the employee may be recalled if
there is an improvement in business conditions. However, a layoff should be used as a
last resort after measures like reducing other business expenses or cutting cost on labor
is unsuccessful.

5.3 Unacceptable Behavior

Unacceptable behavior of an employee may also require an employer to fire an
employee. For example, if the code of ethics of the company's prohibits strictly making
available confidential company information to outsiders and it is discovered that an
employee has done so, the employer may have grounds for termination. The action of
theft of company property, involvement in verbal or physical sexual harassment or the
act of threatening another employee may include other reasons for employee
separation. The employee’s disrespect or insubordination to supervisors may also invite
stringent action.

5.4 Absenteeism
An employee who misses work frequently or is habitually late comer negatively affects r
the productivity of business and can put an undue burden on other workers. Chronic
 absenteeism could indicate that the employee is not mentally healthy or is job
dissatisfied. If an employee violates attendance norms, the supervisor can have a
personal discussion to reach the cause of the problem. If the organization has an
employee assistance program in operation, the employee can be reminded to avail so
that the employee can seek confidential assistance, if required.

6. Process of Employee Separation

Employee Separation is the process to ensure that an employee quitting the company is
exited in a well defined and orderly way. Several firms take the process of employee
separation very seriously and have a dedicated department to deal with employee exits
from the company.
Employee separation can be voluntary as well as involuntary. When the employee quits
the company on his or her own accord, it is voluntary separation. This is the most
common form of employee separation. In recessionary times, involuntary separation or
the employer’s the act of asking the employee to leave is quite common. This form of
employee separation is called involuntary separation. The difference in these two forms
of separation is that in case of voluntary exits, the employee is entitled to get most of the
benefits and perks whereas in case of involuntary separation or in instances where
disciplinary or performance related issues are involved, the employee might not get such
benefits..

7. Components of the Employee Separation Process

The employee separation process begins with the time the employee gives notice to the
employer of his/her intention to quit. Once a notice is given by an employee, the HR
department freezes all the financial transactions and records of the employee. The
employee’s supervisor is given the responsibility to ensure proper handover and closure
of works assigned to the employee. Often, the notice period varies from a month to three
months depending on the level of the employee in the organization. Further, the
employee’s supervisor drawn out a handover plan covering all aspects of different
aspects of closing out on the work the employee is performing.

Summary
 Separation of employees is another significant career transition. Employees may
leave the organization involuntarily, through layoff or discharge, or voluntarily,
through resignation or retirement, retirement, and retrenchment.
 The time may come during the career of a business owner where he faces the
unwilling task of terminating an employee. Unacceptable performance or
behavior exhibited by the employee or as a result of a change in business
conditions may include the reasons for employee separation.
 An employer may require an employee to go because he/she is unable to
perform the necessary aspects of the job.
 Unfavorable business conditions may compel an employer to lay off employees
for economic reasons.
 Unacceptable behavior of an employee may also require an employer to fire an
employee.
 Chronic absenteeism could indicate that the employee is not mentally healthy or
is job dissatisfied. If an employee violates attendance norms, the supervisor can
have a personal discussion to reach the cause of the problem. If the organization
has an employee assistance program in operation, the employee can be
reminded to avail so that the employee can seek confidential assistance, if
required.
 Employee Separation is the process to ensure that an employee quitting the
company is exited in a well defined and orderly way. Several firms take the
process of employee separation very seriously and have a dedicated department
to deal with employee exits from the company.
 The employee separation process begins with the time the employee gives
notice to the employer of his/her intention to quit. Once a notice is given by an
employee, the HR department freezes all the financial transactions and records
of the employee. The employee’s supervisor is given the responsibility to ensure
proper handover and closure of works assigned to the employee.