A Study On The Impact of Layoff (Printout Softbinding)

A STUDY ON THE IMPACT OF LAYOFF
AMONG THE WORK FORCE

A dissertation submitted to the
TAMIL NADU INSTITUTE OF LABOUR STUDIES
In partial fulfilment of the requirements for the award of the degree of
Diploma in Labour Laws with Administrative Law
Submitted by
SATHYAMOORTHY D
Register No: DLL 1965
UNDER THE GUIDANCE OF
DR. V.BALARAMAN
M.A(Econ); M.A(Hist), M.A(Eng); MBA, B.L.,DSW; DD,
Additional Commissioner of Labour [Retd],
Advocate, High Court, Madras
TAMILNADU INSTITUTE OF LABOUR STUDIES

No.5, Kamarajar Salai,
Chennai– 600 005
A Study On The Impact Of Layoff Among The Work Force 1
CERTIFICATE
This is to certify that the project work was undertaken with my guidance and
dissertation entitled, ‘A STUDY ON THE IMPACT OF LAYOFF AMONG THE WORK
FORCE’ was designed and executed by SATHYAMOORTHY D (DLL 1965), in
partial fulfilment of the requirement for the award of the Degree of Diploma in
Labour Laws with Administrative Law for the academic period 2019-2020. This
dissertation is the original work of the said candidate, carried out exclusively for the
above-mentioned purpose.
Signature of the Guide
DR. V. BALARAMAN
M.A(Econ); M.A(Hist), M.A(Eng); MBA, B.L.,DSW; DD,
Additional Commissioner of Labour [Retd],
Advocate, High Court, Madras
Place : Chennai
Date :

ACKNOWLEDGEMENT
I would like to extend my deepest thanks to the Lord Almighty for giving me all of the
wisdom, the knowledge and strength to carry out this dissertation in a successful manner.
I express my heartfelt thanks to Dr. V. Balaraman, M.A(Econ); M.A(Hist), M.A(Eng);

MBA, B.L.,DSW; DD, Additional Commissioner of Labour [Retd], Advocate, High
Court, Madras, Faculty, research guide, Tamil Nadu Institute of Labour Studies, but for
whose untiring help this dissertation would not have been completed at the right time. His
meticulous guidance, valuable suggestions and constant encouragement provided the
necessary impetus to complete the study.
It is my privilege to express my professional sense of guidance to our Director Mr. K.

Jeyabalan, M.Sc., M.L., Tamil Nadu Institute of Labour Studies for fostering an excellent
academic climate, which ultimately made this endeavor possible.
It is my privilege to express my professional sense of guidance to our Deputy

Director/Course Director Mr. U. Lakshmikanthan, M.A., M.A., B.L., M.B.A.,M.L.M.,
PG.Dip. PM & IR., Special Joint Commissioner of Labour, Office of the Commissioner of
the Labour, DMS, Chennai – 600006, Tamil Nadu Institute of Labour Studies for fostering
an excellent academic climate, which ultimately made this endeavor possible.
I am extremely grateful to my parents, relatives, well-wishers, and alumnus for timely help
in completing my research document.
SATHYAMOORTHY D.
DLL 1965

DECLARATION
I hereby declare that the project work entitled ‘A Study On Impact of Layoff among the
Workforce’ submitted by me in partial fulfilment of the requirement for the award of
degree Diploma in Labour Laws with Administrative Law under the guidance of
Dr.V.Balaraman and it is my original work.
SATHYAMOORTHY D.
DLL 1965

INDEX
S. PAGE
CONTENTS
No. No.
CHAPTER – I
1. 6
INTRODUCTION
CHAPTER – II
2. 8
OLD & NEW CONCEPT OF “LAY-OFF”
CHAPTER – III
3. 9
IMPORTANCE OF INDUSTRIAL DISPUTES ACT
CHAPTER – IV
4. 10
OBJECTIVES OF INDUSTRIAL DISPUTES ACT, 1947
CHAPTER – V
5. THE SALIENT FEATURES OF THE INDUSTRIAL DISPUTES 12
ACT, 1947
CHAPTER – VI
6. 13
IMPORTANCE OF INDUSTRIAL LAW IN INDIA
CHAPTER – VII
7. 14
LAY-OFF AND RETRENCHMENT IN INDIA
CHAPTER – VIII
8. 16
REVIEW OF RELATED LITERATURE
CHAPTER – IX
9. 40
RESEARCH METHODOLOGY
CHAPTER – X
10. 41
ANALYSIS AND INTERPRETATION
CHAPTER – XI
11. 44
FINDINGS, SUGGESTIONS AND CONCLUSION
CHAPTER – XII
12. 48
APPENDIX & REFERENCES

CHAPTER – I: INTRODUCTION
A layoff describes the act of an employer suspending or terminating a worker, either
temporarily or permanently, for reasons other than an employee's actual performance. A
layoff is not the same thing as an outright firing, which may result from worker inefficiency,
malfeasance, or breach of duty.
In its initial context, a layoff was meant to denote a temporary work interruption, but over
time, the term has morphed to describe a permanent lack of work. A layoff may happen to a
displaced worker whose job has been eliminated because an employer has shuttered its
operation or relocated. A worker may likewise be replaced due to a production slowdown or
cessation.
Layoffs may happen for a variety of reasons that may affect an individual or a group of
workers, in both the public and private sectors. Generally, layoffs are conducted to reduce
salary expenditures, in an effort to increase shareholder value. Layoffs may occur when an
employer's strategic business objectives or processes change, in the face of declining revenue,
the adoption of automation, or the off shoring or outsourcing.
Given that layoffs are understandably unpopular with workers, the term has a number
of synonyms, as well as several euphemisms. For example, layoffs may also be referred to
as a "downsizing," "rightsizing"(exact or optimum sizing) or a "smart sizing.(maximise the
production with help of efficient worker using different alternatives)"
Similarly, a laid-off worker may become unemployed as part of a "workforce reduction,"

"reduction in force," "redeployment" or an "excess reduction." Employees in a late-career
layoff may be given "early retirement," meaning they will stop working and cease collecting
a pay cheque but will remain eligible for retirement benefits.
While workers bear the brunt of layoffs with lost wages and the uncertainty of
unemployment, the effects of layoffs are also felt in local and national economies. They
likewise impact the workers who remain employed, following such workforce reductions.

For example, workers who have witnessed their colleagues being laid off report greater
anxiety and increased concerns over their own job security. This often results in reduced
motivation, and employee attrition. Workers who have been subject a layoff may also feel a
level of distrust toward future employers, which is why some companies may try to lay off
multiple workers at once, in order to soften the psychological blow and make sure people do
not feel singled out.
Mass layoffs may create a sizable impact on the economy and tax base of a community or
region and may create a ripple effect among related industries across a country. This
dissertation shall focus on the impact of lay-off among the work force.

CHAPTER – II OLD CONCEPT & NEW CONCEPT OF
“LAY-OFF”
Old concept of lay-off did not exist formerly in the Industrial Disputes Act, 1947. All
disputes relating to “lay-off” prior to the incorporation of its definition in the Act were
decided in accordance with the judicial pronouncement as there existed no definition of term
“lay-off” formerly in the Act.
After independence due to modernization in textile mills, often there was lay-off and
retrenchment of workmen without any compensation payment in majority of the
managements, although few of them paid compensation, thus there was no uniformity norm
for compensation in such circumstances which resulted in the deteriorating economic
conditions of the labour class, consequently, the stake of National economic development and
social security of the society necessitated for the enactment of the social/beneficial legislation
like the present Act1.
NEW CONCEPT OF LAY-OFF

The Industrial Disputes (Amendment) Act, 1953 inserted the definition of Lay-off by section
2 and this definition is analogous to the definition of Lay-off as contained in Section 2(kkk)
of the industrial Disputes Act. 1947. The definition of term “Lay-Off” did not exist formerly
in the industrial Disputes Act, 1947.
The consequences of lay-off are dealt in Chapter V-A of the Act. The provisions contained in
this chapter provide for payment of compensation to the laid –off workers. Section (kkk)
prescribes Lay-off as the failure ,refusal or inability to provide employment to the workmen
by the employer on account of shortage of coal ,power or raw material, or the accumulation
of stock, or the breakdown of machinery, or natural calamity, or any other connected reasons.

CHAPTER – III IMPORTANCE OF INDUSTRIAL
DISPUTES ACT
Labour legislation is one of the most progressive and dynamic instruments for achieving
socio-economic progress. There is no other branch of law which embraces such a wide and
effective role in social engineering and social action. It is here that the Industrial law
distinguishes itself from other branches of Law. The progress of a country being dependent
upon the development of industry, the Industrial Laws play an important role in the national
economy of a country. The Industrial Law keeps a check upon the industrial operations and
makes it mandatory for the compliance of all the statutory provisions provided under the law.
The Industrial law was enacted as labour problems constituted a serious menace to the
society, and needed solution, if not to eradicate then at least to mitigate them in the very
beginning. In a country like India, where the bulk population of Indian society constitutes
poor and illiterate labour class and therefore unconscious of their rights. The socio –economic
status of the worker was far below the status of their employer. As such they could not
exercise their free will in negotiating with the employer for employment. The workers were
left with no choice but to accept such terms and conditions of employment to their utter
deterioration with their sole means of earning their livelihood. The employer taking undue
advantage of these dominantly prevailing circumstances in the Indian society exploited the
workers for their own benefit. In absence of social security, the pathetic conditions of the
workers were worsening drastically day to day affecting the National economy.
In was then, that the Government of India intervened with some socially beneficial labour
enactments like the Workmen’s Compensation Act. The Payment of Wages Act, The
Minimum Wages Act, The Industrial Disputes Act, with a view to provide social security and
protect the workers from the clutches of the mighty employers.
The importance of the labour laws is evident from the fact that our Constitution guarantees
social justice to the people of India, “Social Justice” means achievement of socio-economic
objectives.

CHAPTER – IV OBJECTIVES OF INDUSTRIAL DISPUTES
ACT, 1947
The Industrial Disputes Act is a progressive measure of social legislation aiming at the
improvements of the conditions of the workmen in industry.
The object of the industrial relation legislation in general is industrial peace and economic
justice. The prosperity of any industry depends upon its growing production. The production
is possible only when the industry functions smoothly without any interruptions. The factors
which influence the production are absence of disputes and harmonious relationship between
the labour and the management. Therefore, every industrial relations legislation necessarily
aims at providing conditions congenial to the industrial peace. Economic justice is another
objective aimed at by such legislations. Almost all interruptions in production are due to
industrial disputes. Dissatisfaction with the existing conditions is the root cause of industrial
dispute. The country being the custodian of public interest intervenes by “State Legislation”
with a view to provide economic justice by ensuring fair returns to the labour.
The Industrial Disputes Act, 1947 came into operation on the 1st day of April, 1947. The
object of all labour legislation is to ensure fair wages and to prevent disputes so that
production might not be adversely affected in Banaras Ice Factory Ltd. v Its Workmen.
In Workmen of Dimakuchi Tea Estate v/s Management of Dimakuchi Tea Estate, Supreme
Court has analyzed the following:
(1) The Promotion of measures for securing amity and good relations between the employer
and workmen;
(2) An Investigation and settlement of industrial disputes between employers and employers,
employers and workmen or workmen and workmen with a right of representation by a
registered Trade Union or Federation of Trade Unions or Association of employers or a
federation of association of employers;

(3) The prevention of illegal strikes and lock-outs;
(4) Relief to workmen in the matter of lay-off, retrenchment and closure of an undertaking;
(5) Collective bargaining.

CHAPTER – V: THE SALIENT FEATURES OF
THE INDUSTRIAL DISPUTES ACT, 1947
1) Any Industrial disputes may be referred to an industrial tribunal by an agreement of parties
to the dispute or by the State Government if it deems it expedient to do so.
2) An award shall be binding on both the parties to the disputes for the specified period not
exceeding one year. It shall be normally enforced by the Government.
3) Strikes and Lock-outs are prohibited:

During the pendency of conciliation and adjudication proceedings;
During the pendency of settlement reached in the course of conciliation proceeding;
During the pendency of awards of Industrial Tribunal declared binding by the appropriate
Government.
4) In public interest or emergency, the appropriate Government has power to declare the
transport (other than railways), coal, cotton textiles, foodstuffs and iron and steel industries to
be a public of six months.
5) In case of lay-off or retrenchment of workmen the employer is required to pay

compensation to them.
6) Provision has also been made for payment of compensation to workmen in case of transfer
or closure of an undertaking.
7) A number of authorities such as Works Committee, Conciliation Officers, Board of

Conciliation, Court of Inquiry, Labour Courts, Tribunal and National Tribunal are provided
for settlement of Industrial disputes. The nature of powers, functions and duties of these
authorities differ from each other but each one of them plays an important role in ensuring
industrial peace.

CHAPTER – VI: IMPORTANCE OF INDUSTRIAL LAW IN
INDIA
The Industrial law in pre-independence India was in a rudimentary form. But during post–
independence era there was a development of a new jurisprudence, “Industrial Law” and with
the development of industry, there was simultaneous development of Industrial Law.
Evidently the steady growth and importance of this law can be judged from the bulk of cases
before the Supreme Court on Industrial law matters. The economic growth of a country being
dependent upon the development of industry, the industrial Laws play an important role in
the national economy of a country. The object of the industrial relation legislation in general
is industrial peace and economic justice. The prosperity of any industry depends upon its
growing production, which is possible when the industry functions smoothly without any
interruptions. The most vital ingredient which is essential for the growth of economic
production is harmonious and peaceful relationship between the labour and the, management
along with the economic justice. Industrial Disputes is the root cause arising due to the
dissatisfaction with the exiting economic conditions. History has proved that the labour
struggle is a result of a continuous demand for fair return to labour in various forms with a
view to maintain economic equilibrium and social security at par .Hence with same view,
economic justice has been ensured to people of India by our Constitution. The object of all
labour legislations is to ensure fair wages and to prevent disputes and maintain cordial,
harmonious and peaceful relationship between the labour and management and enhance
National Economy with socio-economic justice environment.
The Industrial Disputes Act is progressive measure of social legislation aiming at the
improvement of the conditions of workmen in the industry. The act includes the provisions
for reference of industrial disputes to Industrial Tribunal, binding award enforceable by the
Government.

CHAPTER – VII: LAY-OFF AND RETRENCHMENT IN
INDIA
Originally the Industrial Dispute Act did not provide for lay-off and retrenchment. The
explosive situations due to enormous accumulation of stocks, particularly in the textile mills,
with the consequence of probable closure, large scale lay-off and retrenchment in many mills
provoked to introduce some effective measures to prevent large scale industrial unrest in the
country. The ordinance promulgated for this purpose in 1953 was replaced by the Industrial
Disputes (Amendment) Act, 1953 which commenced retrospectively from 24th October,
1953. Thus, Chapter VA was introduced into the Act to regulate lay-off, retrenchment,
transfer and closure of undertakings. The provisions under this Chapter have much impact on
some of the rights and privileges of the employers who are subjected to certain new liabilities
and restrictions in the event of lay-off, retrenchment, transfer or closure of undertakings. In
1976, a new Chapter VB, was added to the Industrial Disputes Act incorporating more
stringent conditions against lay-off, retrenchment and closure of certain establishments.
Application of Chapter VA. Section 25-A makes it clear that the provisions of Sections 25-
C to 25-E shall not apply to:
(i) Industrial establishments in which less than fifty workmen on an average per working day
have been employed in the preceding calendar month; or
(ii) Industrial establishments which are of a seasonal character or in which work is performed
only intermittently.
Hence, the provisions relating to lay-off will not be applicable to industrial establishments
with less than 50 workers in the preceding calendar month4 or in case of seasonal character
or with intermittent works, industrial establishment for this purpose is defined to mean:
(i) A factory as defined in the Factories Act, 1948; or

(ii) A “mine” as defined in the Mines Act, 1952; or
(iii) A “plantation” as defined in the Plantation Labour Act, 1951.

CHAPTER – VIII: REVIEW OF RELATED LITERATURE
Thematic Literature Review has been conducted in this dissertation
Thematic reviews of literature are organized around a topic or issue, rather than the
progression of time. The only difference here between a "chronological" and a
"thematic" approach is what is emphasized the most: the impact of layoff among the
work force. Note however that more authentic thematic reviews tend to break away from
chronological order. A review organized in this manner would shift between time
periods within each section according to the point made. This method of data
organization is based on grouping different literature sources by their topic and
theoretical concept in order by their relevance and importance.

I. The Impact of Forced Layoffs - BC HRMA Research Group.
How to avoid the negative consequences of laying off staff. This Research Briefing is a
service from BC HRMA’s research group. Our aim is to make it easier and quicker for HR
professionals to find and apply the latest and best people management insight to their
challenges and projects. This paper contains a concise and practical summary of a recent
academic finding that should shape your HR practices. Summary Forced layoffs and
restructuring have become common strategies for companies struggling to compete, however
these approaches rarely achieve the key company objectives such as cost reduction and
increased levels of efficiency, productivity, profitability, and competitiveness. A broad range
of research shows that HR professionals play a key role in enabling their organization to
restructure effectively, achieve cost or productivity objectives, without creating unintentional
organizational costs. Forced layoffs (sometimes termed downsizing) refer to the planned
elimination of jobs or roles in order to save costs. However, multiple studies cited in the
report by Gandolfi1 show that downsizing does not save money, and instead may hurt
companies’ results because the retained employees become less trusting, less engaged, and
more apt to look elsewhere for work. Why Forced Layoffs Don’t Work Forced layoffs have
become an oft‐used strategy for companies wanting to regain a competitive edge. First used
during the recessions of the 1980s and 1990s, the approach has become a common method
for companies to make sharp cost reductions, at least for a short period of time. The financial
logic of the process is to incur a one‐ time cost to gain subsequent annual recurring savings.
However, in several studies conducted since the practice became mainstream, and cited in the
articles by Gandolfi and Cascio 2, companies often experience higher costs as the result of
their forced layoffs. In order to fill in knowledge gaps left by staff reductions; many
companies hire consultants at higher rates than their former employees’ salaries. And those
companies resort to contracting the same employees who were recently let go, but at much
higher hourly rates. When companies look only at the balance sheet, they ignore the
organizational costs of cutting so many staff. Without certain key long-term employees, some
companies are simply unable to replace lost understanding about the organization, its

customers, and processes. This leads to lost revenue, poor productivity and sub-par results.
The stock market may respond positively to companies that announce extensive
restructurings, and may briefly lift the company’s share price. But in the long term, the
majority of companies that have instituted forced layoffs did not realize improved financial
performance either on the balance sheet or on the stock exchange. One of the reasons forced
layoffs fail to create a more efficient organization is because the layoffs are often targeted at
job cuts where greater emphasis is given to reducing numbers and eliminating a specific job
description instead of considering the individual employee. When forced layoffs fail to
consider the individual and their links to the organization– obtained through their years of
experience, rapport with certain customers or other department members and their
intelligence about the organization – the layoffs may unintentionally cause reductions in
productivity.
Alternatives to layoffs
Other strategies can help businesses control costs more effectively, increase productivity and
boost profitability. Employing a consultative process that includes every employee and the
full support of every level of the organization from the C‐level on down, some organizations
have invoked across‐ the‐board salary reductions. Other measures such as voluntary layoffs, a
reduced work week, and unpaid leave or vacation time have been effective in cost savings.
According to research cited by Cascioibid, organizations can plan better and make more
effective choices when they include the following six principles as they weigh the benefits of
implementing a strategy of forced layoffs:
1. Ensure that the layoffs are implemented after careful consideration of the roles slated for
elimination and the employees in those roles. Human Resources professionals are the source
of this information, and their insight into the way that roles and people function will provide
key insight into any re‐structuring decisions.
2. Clearly identify both short‐term strategies such as reduced hours, unpaid leaves,
sabbaticals and long‐term strategies including organizational redesign during a drive to
reduce overall staff costs.

3. Pay equal attention to the employees who are going to lose their jobs and those who
remain. For those who are leaving, provide fair severance, offer opportunities for re ‐training,
and outplacement resources. For the remaining employees, provide multiple two ‐way
communication channels (especially face‐to‐face) between leadership and employees to give
them many opportunities to share their concerns, ask questions and deepen their
understanding of the business realities. Make sure those who remain are aware of the support
and resources provided by the company to those who were laid off. This makes a significant
difference to future staff productivity and mitigates the increase in voluntary turnover that
follows every forced lay off.
4. There may be ways to target cost savings that are not related to staff costs. Engaging
employees through supplying accurate data can be effective in identifying redundancies,
excess costs and inefficiencies.
5. When looking to reorganize it is important to focus on creating efficiencies by geography

or within specific product lines. Making an across the board cut is not an effective way to cut
costs and will do even more damage to the organization’s ability to compete.
6. Staff reductions and the associated cost reductions can be achieved when the focus of the
restructuring is connected to a well communicated and viable new organizational strategy and
goals. Rather than focus reductions in staff on cost saving it is more effective to create a
compelling future vision and purpose for the organization and then align your people
resources to this.
Implications for HR Professionals
Before a company decides to try and save costs by cutting staff they need to engage with
their HR group to understand the likely consequences, unintended costs and challenges
relating to this approach. All the research into this area demonstrates that simply removing
people to cut costs does not work. To be an effective support to the organization when facing
this type of situation the Human Resources group needs to have detailed knowledge of how
work is carried out in the organization, as well as how the types of relationships among units
and employees contribute to the company’s strategy and goals. Through good quality talent

management processes and an understanding of how the business works, HR professionals
should have a strong influence over how any form of restructuring is targeted and
implemented. The HR group is also in a position to broker agreements with employees
throughout the organization, including identifying appropriate concessions and illuminating
areas of overlap and inefficiency. In order to be a strategic player in this type of business
challenge the HR group needs a detailed understanding of the business, the competitive
environment and the people and skills which make it all work. With this level of insight, and
the relationships to be part of the decision process, then the HR group is properly positioned
to mitigate or avoid the many negative impacts which come from the forced layoff of staff.
This article is based on the following research papers:
1. Gandolfi, F. (2008, April). Learning from the Past ‐‐ Downsizing Lessons for

Managers. Journal of Management Research Cascio, W.F. (1993 February).
2. Downsizing: What Do We Know? What Have We Learned? The Executive, Vol. 7,

Published by: Academy of Management

II. The Impact of Layoffs - Dr. Sunil Ramlall, Associate Professor, School
of Business, Hamline University
“If it’s not you, it’s your spouse. Your parent or your child. Your neighbour or your friend. In
these economic times, everyone knows someone who was laid off by a company or
organization.”
As of November 2008, there were more than 188,900 unemployed individuals in the state of
Minnesota, and nationally, the number of unemployed persons in the U.S. has increased by
2.7 million from December 2007 to November 2008. For businesses, it’s a financial decision.
For families and communities, it has not only financial but also social, community, and
personal implications.
For School of Business Professor Sunil Ramlall, layoffs create more questions than answers.
“What is the impact of layoffs on individuals, organizations, families and as communities?”

he wondered. “How do employees deal with layoffs? What are the psychological and
financial impacts on the survivors of layoffs?”
Ramlall teamed with Hanne Haas, a student in the School of Business’s MBA program, to
explore the issue. The two hoped that by helping individuals and organizations better
understand the consequences of layoffs, they will be better able to more effectively manage
them and their repercussions. The data was gathered using a sample of individuals collecting
unemployment insurance in the state of Minnesota. The total participation is expected to be
over 10,000 when the research is completed.
Here is a summary of some of their findings.
The Emotional Impact

“It is no surprise that stress-related illnesses were 50 percent higher in the companies that had
downsized their workforce compared with those companies that had not undergone

downsizing,” Ramlall and Haas wrote (Cappelli et al., 1997). “Reports of employee burnout
were more than twice as high at companies that had downsized compared with those that had
not downsized. With the high number of individuals being laid off from their jobs and the
relative unavailability of similar job openings, people are left without adequate income for
extended periods of time, resorting to very different and frequently lower-paying jobs,
resulting in higher levels of stress and more health symptoms.”
To explore the emotional impact, Ramlall and Haas focused their study on six coping
strategies commonly used to handle the stress of being laid off: positive-thinking coping,
direct-action coping, instrumental support seeking, avoidance, disengagement, and job
seeking.
“Positive-thinking coping, direct-action coping, and support seeking represent control-

oriented coping strategies, whereas avoidance and disengagement are forms of escape coping,
according to Latack (1986),” they wrote. “Control-oriented coping strategies are more likely
to be exhibited when situations are viewed as controllable, whereas escape coping is likely to
be used in situations in which there is little the individual can do to control the outcome or
recurrence of the event (Folkman, 1992).”
Coping strategies are important because they dictate what actions the people will take.
“Coping goals explain why individuals pursue different coping strategies when confronted
with the same situation,” Ramlall and Haas noted. “For example, when displaced, some
workers establish and pursue the goal of finding another job. This goal presumably
necessitates job-search efforts (a control-oriented coping strategy) aimed at reemployment.
Other displaced workers may choose to ‘mellow out’ because of the stress and anxiety
associated with job loss (an escape-oriented coping strategy). The more positive one stays,
the more active one will remain in the job search and continue to utilize control-oriented
coping strategies.”

Financial and Familial
Ramlall and Haas also explored the financial implications of layoffs. In addition to “the
lifestyle changes people have made, including reduction of savings and the sale of stock and
other property by individuals to cope with the loss of their income,” they found that the
financial loss spurred social losses. “Many individuals describe the changes in their earlier
lifestyle and a greater impact on their social life as additional consequences of layoffs,” they
wrote.
Layoffs also have a significant and enduring psychological impact on children. “This stems
from parents experiencing financial challenges that lead to heightened states of anxiety,
depression, behaviour problems and poorer peer relationships in kids,” Ramlall and Haas
found. “Some previous research findings have even suggested that layoffs can have effects
similar to other kinds of trauma, such as parental divorce.” While it is a difficult subject to
discuss, Ramlall and Haas encourage parents talk with their children about what is happening
and the rationale for lifestyle changes.
Ultimately Effective?
“Given the current economic challenges, layoffs are a natural course of action for
organizations,” Ramlall and Haas wrote. “Organizational downsizing as a change
management strategy has been adopted for more than two decades, but today, the prime
impetus of most downsizing efforts is the desire for an immediate reduction of costs and
survival. The rationale underlying organizations’ decision to downsize is straightforward: by
reducing costs, executives hope to improve firm profitability.”
But what isn’t straightforward, they found, is whether layoffs really achieve their intended
effect. “Studies show that the effects of layoffs on organizational performance are mixed at
best, and in some instances they fail to produce the desired improvements (e.g., Cascio,
2003),” they wrote.

Layoffs also affect how a company is seen in the marketplace. “At stake in the layoffs is the
reputation of the employer, inability to attract and retain top quality hires, and maintain
established levels of productivity.”
This topic is just one of many that Ramlall and Haas plan to pursue in their continuing
research.
While they still have as many questions as they have answers, what is clear from their work is
that layoffs do not have only short-term effects, but also critically affect the individual laid
off and his or her entire family.
“Hopefully, this research can serve as a resource to our Hamline community and beyond in
really understanding layoffs from a broader perspective,” they said.

III. Managing Employees in a Downsized Environment -
Society for Human Resource Management
Scope
This article examines the challenges faced by HR professionals after the organization has
been downsized through layoffs. HR must deal with issues and concerns that are likely to
arise among workers who survived the downsizing and must help the workforce move
forward to achieve organizational goals. This article focuses on managing in an environment
where downsizing has taken place; it does not deal with planning or implementing a
downsizing.
Overview
Human resource professionals are key to enabling an organization to manage and resolve
whatever issues arise after it has downsized its workforce through layoffs. The challenges
facing HR in the post-downsizing period fall into eight general categories of professional
responsibilities. Each is described and discussed in this article:
 Communications necessitated by downsizing.

 Reallocation of job responsibilities.
 Adjusting compensation and benefits.
 Retraining.
 Maintaining engagement and satisfaction.
 Retaining and rehiring.
 Maintaining customer relationships.
 Evaluating systemic and individual performance.
This article focuses on managing in an environment where downsizing has already taken
place; it does not deal with planning or implementing a downsizing. For details on those
aspects of the downsizing process.
Background
Workforce reduction can be accomplished through attrition, voluntary termination, early
retirement incentives or compulsory termination. Situations in which employees are required
to leave—the most difficult type of downsizing for both the employees and the employer—
require careful preparation and implementation. But those are just two of the three major
stages of downsizing. The third stage—as important as the other two stages—is managing the
HR responsibilities after the downsizing has been accomplished.
Essentially, the major aspects and effects of downsizing continue into the period after the
organization has shrunk its workforce. Surviving employees harbor concerns about job
security. Many are uncomfortable with change, and most survivors in a downsized
environment are likely to feel that they have to work more, that their jobs will be less
satisfying and that they will be paid less.
At least some of the remaining employees will likely need retraining, which HR typically
arranges. There may also be administrative obligations pertaining to employees no longer on
the payroll but still connected for a time with the organization's benefits program. HR may
find it is fielding more queries about retirement plans from laid-off employees and helping
more former employees find new jobs. Additionally, at least some of the legal concerns that
arose during the planning and implementation stages will likely be present for a time after the
downsizing.
Business Case
Experts generally say that layoffs should be an organization's last resort for coping with
challenges in its business environment. Nonetheless, most employers at one time or another
find it necessary to lay off employees to handle competitive pressures or financial difficulties
—or sometimes even to survive. Among the reasons commonly cited for downsizing are the
following:
 Recession or other widespread business decline.

 An industry-specific decline.
 Technological change.
 A natural disaster.
 Company failure.
 Mergers and acquisitions.
 Competitors' cost cutting through actions such as offshoring and outsourcing.
 Terrorism or acts of war.
After the downsizing, the reduced workforce must be managed in ways that allay survivors'
concerns and increase their engagement so they can help the organization reach the goals that
the downsizing was designed to achieve.
HR's Role
When an organization undergoes downsizing through layoffs, most of the HR problems that
existed beforehand still exist afterward to some degree. Even if the organization becomes
more streamlined, it does not necessarily see a quick improvement in productivity. Moreover,
the downsizing may lead to other problems, particularly the surviving employees' attitudes
and concerns about job security and workload increases.
As difficult as HR's role may be in a thriving organization, the role is no less challenging in a
downsized environment because of additional tasks that HR professionals must address. They
must make certain, for example, that communications related to the downsizing are ample
and effective, they will help adjust job responsibilities if necessary, and they may have to
help make requisite changes in compensation and benefits programs. In addition, HR will be
instrumental in retraining remaining employees and in maintaining their engagement and job
satisfaction. Over the long term, HR will continue to have responsibilities in retention and
hiring, in customer relationships, and in evaluating systemic and individual performance.
Moreover, if the HR department itself has been downsized, it would presumably have to
function with fewer of its own professionals handling the tasks.
Communications
Managing communications is a major part of the process of transitioning to a post-layoff
workplace environment. After an employer implements a layoff, the theme of
communications changes—from specific types of information for employees losing their jobs
to types of communication tailored for those who remain with the organization. Until the
downsizing has been completed, communications include issuing Worker Adjustment and
Retraining Notification Act (WARN) notices, identifying and informing employees who will
be laid off, explaining COBRA benefits, conducting exit interviews, and setting up
outplacement services. After the downsizing, communication turns its focus to employees
who remain.
Communicate the new world order
The purpose of a layoff is to realign the workforce with current business conditions.
Therefore, a fundamental communication after a layoff is to explain to employees how
management believes the change will improve the organization. Essentially, management
wants to convince employees that the layoffs were necessary, appropriate, legal, fair, and
compassionate and designed to create a stronger organization—all of which should be true.
Although such communication might seem like a "pep talk," it should be planned and carried
out as a serious effort to bring the surviving employees together in a cohesive and
enthusiastic team. The employees who have survived should be convinced that they are still
employed because the organization needs and values their knowledge, skills and abilities to
full-fill ongoing roles.
Depending on the organization's particular circumstances, this communication process might

require educating employees about the organization's economic conditions, information that
they would not ordinarily deal with in their day-to-day work. For example, the organization
may have to tell employees: "We needed to outsource these jobs because our major
competitors have already done so, which enabled them to lower their labor costs and increase
their sales. Bottom line: Our competitors were making money, and we were losing money."
The first such talk with employees should involve those most affected by the layoff.
Subsequent talks may be necessary for the entire organization. Over time, the talks should
become strategy sessions and eventually standard business meetings.
Communicate what employees need to hear
HR professionals or others responsible for organizational communications should keep in

mind that employees need to feel safe before they can go on to become productive in a
downsized environment. Various employees have differing concerns. For some managers or
executives, maintaining the value of stock options may be paramount. For other employees,
maintaining salary, bonuses, health insurance benefits or work/life flexibility may hold more
value. In all instances, communicators must be truthful and encouraging, but they should
never make unrealistic promises.
Keep communication continuous and comprehensive
Communication should expand on a variety of fronts, including the business's progress in the
post-downsizing environment. The communication should go both ways, with members of
upper management realizing that they learn more by listening than by talking. Keeping the
dialog going until it evolves from crisis mode to business-as-usual is crucial.
Analyze employee responses
A downsized organization should analyze the feedback to its communication efforts to

determine if any refinements are needed, whether in the organization as a whole or at the
individual level. The employer may discover it needs to restructure workgroups, provide
training, implement additional layoffs, adjust compensation and benefits, or find ways to
mollify disgruntled customers. Employers should listen to what survivors are saying because
their knowledge is part of why they survived the layoff.

Reallocating Job Responsibilities
Conducting a layoff involves prioritizing job requirements, analyzing the existing workforce
and making the layoffs in such a way that the most vital jobs will continue to get done. If this
analysis is not done before the layoff is implemented, the layoff may appear to be—and in
fact may be—unfair and clumsily executed. But the process cannot stop there, because
reshuffling surviving employees' job duties involves significant disruption to the entire
employment relationship:
 Surviving employees may be required to take on tasks they dislike or do not do well or
were not hired to do.
 Some surviving employees may dislike their new job descriptions even though the job
changes offer new opportunities.
 HR professionals may find themselves continually analyzing jobs and redrawing job
descriptions.
 Some employees may dislike changes so much that they become disengaged or even
leave the organization.
Adjusting Compensation and Benefits
Although adjusting compensation and benefits should be considered during the planning and
execution of a layoff, some issues in that area may possibly require attention after the layoff
is completed. Most likely, surviving employees will think that they should be paid more for
taking on added work or that they should be recompensed in some way for any loss of fringe
benefits. No one wants to take a step backward. But accommodating such expectations may
undercut the cost-reduction purposes of the layoff.
Nonetheless, making some adjustments in compensation and benefits plans for the survivors
may be necessary. If an employer refuses to do so, employees who have been identified as
critical to the organization's ongoing operations may start looking for greener pastures.

Retraining
Organizations may not have time or resources during the implementation of a layoff to make
decisions on retraining the surviving employees. When the layoffs are completed, however,
the question becomes how the employees who remain can best help the organization achieve
its mission. The answer may emerge one employee at a time. An excellent IT specialist, for
example, may require training and education to become the manager of a team of excellent IT
specialists. And so it may go throughout the downsized workforce.
Moreover, surviving employees will be more engaged and feel more satisfied when they see
their organization reinvesting some of its savings from the layoffs in retraining them and
developing their careers.
Maintaining Employee Engagement and Satisfaction
Downsizing can take a toll on workforce morale; employees may feel betrayed. Long-term
consequences of altering the work environment include increased voluntary turnover and
decreased innovation. In the aftermath of an organizational downsizing, the surviving
employees will engage in comparing what they now have with what they had beforehand—
and with what they think they could get elsewhere. Some employees may feel fortunate to
still have a job and may be resolved to help the organization succeed. Others may feel bitter
toward the employer for not having received a raise, for example, and may be resolved to sue
the organization.
David Noer, an honorary senior fellow at the Center for Creative Leadership, in Greensboro,
N.C., describes a malady called "layoff survivor sickness." 1 It is caused, he says, by a
pervasive sense of personal violation. It is "a toxic set of feelings and emotions"2 that include:
 Fear, insecurity and uncertainty.

 Frustration, resentment and anger.
 Sadness, depression and guilt.
 A sense of unfairness, betrayal and distrust.

Charles O. Trevor, associate professor of management and human resources at the University
of Wisconsin-Madison School of Business, and Anthony J. Nyberg, associate professor at the
University of South Carolina Moore School of Business, as well as Noer and other experts,
have identified HR practices that can help address such post-layoff emotional problems.
Among their recommendations:
 Over communicate, and tell the truth.

 Ensure a perception of fairness in decisions on restructuring.
 Adopt a helping relationship, rather than one of command-and-control management.
 Facilitate grieving and venting.
In their research, Trevor and Nyberg also examined another circumstance that HR
professionals could encounter after their organization has downsized—namely, increased
turnover. They found that the more people an employer laid off, the higher its rate of
subsequent turnover. For example, organizations that laid off 0.5 percent of their workforces
sustained, on average, an annual turnover rate of 13 percent—a rate 2.6 percentage points
higher than the average annual turnover of organizations that did not cut staff. In other words,
an extra 2.6 percent of the workforce left of its own accord, more than five times the
percentage of workers who were laid off.
The researchers added, however, that certain HR practices can substantially buffer the effects
of downsizing on subsequent employee turnover. Practices that foster "job embeddedness," or
attachment, serve as one kind of buffer, according to Trevor and Nyberg. 3 These include
defined benefits plans, sabbaticals, onsite child care, hiring for organizational fit and
flextime. Another category of buffers consists of practices that convey a concern with
"procedural justice"4—in other words, practices that give employees a sense that the company
is just and fair; these practices include providing ombudsmen, confidential hotlines and
formal grievance processes. Implementing or strengthening such practices before layoffs
might help an organization mitigate employee flight after a downsizing, the researchers
reported.

Retention and Rehiring
When an organization has completed a downsizing, it may determine that it lost more good
employees than it had expected or that conditions now indicate that it should start planning to
expand its workforce as economic conditions improve.
Hiring a new employee involves so many uncertainties and costs that it is often better to
retain, retrain and reassign a person already on the payroll or to rehire a former employee.
Rehiring laid-off workers could be advisable for various reasons, such as curtailing outlays
for severance payments or unemployment benefits. In addition, rehiring laid-off employees
might increase company morale.
Employers must keep in mind, however, that the Family and Medical Leave Act and
its state counterparts, as well as the Uniformed Services Employment and Reemployment
Rights Act and similar state laws, provide for employee reinstatement under certain
conditions.
Maintaining Customer Relationships
Customers are likely to be quite vigilant after a significant layoff to see if it has caused any
decline in an organization's performance. Accordingly, managing the customer relationship
after a downsizing is essential. Just as with the employer-employee relationship, there should
be a vendor-customer communication associated with any significant layoff. The customer,
like the surviving employee, will want to know, "How is this going to affect me?"
Communication with customers is a function usually performed by managers outside HR, but
HR professionals are often involved in informing other managers on what has been done and
on what probably can be accomplished by a certain date. In this type of communication, as in
other messages after a downsizing, organizations should avoid making unrealistic promises.

Evaluating Systemic and Individual Performance
A layoff presents special challenges for HR professionals because both individual

performance and organizational standards may be in flux at the same time. Enduring a layoff
may require greater flexibility on both sides. The situation is dynamic, not static. The process
is a continuous effort of comparing how the employees and the organization are doing after
the downsizing, until the downsized organization feels like it is the organization.
Endnotes
1
Noer, D. M. (1993). Healing the wounds: Overcoming the trauma of layoffs and revitalizing
downsized organizations. San Francisco, CA: Jossey-Bass.
2
Ibid.
3
Trevor, C. O., & Nyberg, A. J. (2008). Keeping your headcount when all about you are
losing theirs: Downsizing, voluntary turnover rates, and the moderating role of HR
practices. Academy of Management Journal, 51(2): 259-276.
4
Ibid.

IV. Effects of Organizational Downsizing – Lumen, Human Resource
Management.
Terminating employees is never a fun task. Even the word “termination” sounds doomful,
final, and permanent. People work to support their families and their lifestyles. Without a job,
providing for yourself and those that depend on you is extremely challenging. Therefore,
layoffs put former employees in a tough position and should never be taken lightly. Although
downsizing may be deemed necessary, deciding to make large cuts in the company’s
workforce is going to impact a large number of people, including those getting terminated
and those who are being retained.
It is expected for employees getting laid off to be upset and surprised. Upon announcing
company layoffs, employers may experience backlash from employees. Although these are
normal short-term reactions and consequences of downsizing, there are a wide variety of
long-term effects companies can expect to experience. Read the information below to learn
more.
Loss of Knowledge and Experience
Companies invest a lot of time and resources into hiring and training employees. In theory,
every employee should have the essential skills and knowledge base required to complete
their job functions. Also, the longer an employee is with a company, the more information
and skills they can acquire. Therefore, when employees are laid off during the downsizing
process, the company loses more than just a warm body; they lose the employee’s
knowledge, experience, and expertise. In addition, downsizing companies typically do not
hire new employees, which means there will be a void instead of a replacement.
Increased Workloads and Pressure on Remaining Employees
When companies downsize, gaps within the workload are created. This adds pressure to the
remaining employees to not only complete their current job functions, but also to pick up
additional work to compensate for the terminated employees. The additional responsibilities,
on top of their current ones, can create stress and pressure on remaining employees and
negatively affect the morale and motivation of the team. In addition, when employees are
bogged down in the day-to-day work tasks, there is little time left to learn a new skill or
expand their current knowledge base. This can create a stagnant work environment and stunt
current employees’ growth potential.
Loss of Trust and Security
Layoffs tend to put people on edge. For obvious reasons, terminated employees are feeling a
sense of insecurity as they are being forced to leave the company and find other work. The
remaining employees may also struggle with downsizing. Even if their job has not been cut,
knowing that their company is willing to lay off employees to cut costs can be an unsettling
realization. Although the remaining employees may be relieved to be spared from
termination, there is oftentimes a loss of trust with management and a loss of comfort in job
security.
Legal Issues
Although downsizing is legal in the United States, companies that choose to downsize may
experience legal backlash, specifically from terminated employees. If employees that were
laid off feel as though they were laid off due to discriminatory reasons, they may have
grounds for a lawsuit. Legal consequences are not guaranteed in all downsizing situations;
however, they are a definite possibility.
Client Relations
When a large number of employees are laid off, it may impact client relationships. If there are
fewer people employed to handle clients and their accounts, the customer experience will
suffer. Also, if clients had a great working relationship with an employee that was then
terminated, they may be frustrated to have a new person assigned to their account. These
frustrations may lead to a loss in profitability and customer satisfaction.

V. How layoffs can backfire - Kartikay Kashyap
Layoffs are not really a strategy, but an option resorted to when a company is not doing well
or in other words, when an organisation is not making profits. Layoffs work as first aid
administered to an injured person — something that is applied when companies are bleeding.
But do they really help the companies to recover or revive?
Several researches and analyses have taken place to prove that layoffs do not help
organisations in any way to boost their profits. Many myths are attached to layoffs.
1. Increase in productivity: People think layoffs help increase the productivity of the

company, as they help cut flab and make the company leaner. But a study conducted by
Wharton professor, Peter Cappelli, found that while labour cost decreases during downsizing,
sales per employee also goes down.
2. Reduction in cost: Another myth is that layoffs help cut costs. However, there is no logical
reason to support this. A research conducted by professor Wayne Cascio of the University of
Colorado lists some direct and indirect costs associated with layoffs. These include severance
pay; paying out accrued vacation and sick pay; outplacement costs; higher unemployment-
insurance taxes; the cost of rehiring employees when business improves; low morale and
risk-averse survivors’ potential lawsuits and sabotage.
The research by Cascio also mentions that IBM had to spend 700 million dollars on employee
restructuring in 2007 and Microsoft spent around 1.6 billion dollars during a mass
downsizing activity in 2014 when they laid off 18000 employees.
3. Increase in profitability: Yet another myth that exists is that by cutting costs through
downsizing, there will be an increase in the profitability of a company. This is also not true.
A study of 122 companies found that downsizing further reduces the profitability of a
company and the most affected are the organisations in the R&D intensive sectors. Cascio’s
study of firms in the S&P 500 also established that companies which downsized remained
less profitable than the ones that did not.

Another survey by the American Management Association on the companies’ own
perceptions of layoffs reported that half the companies did not see any increase in operating
profits and one third did not see any positive impact on the productivity of the workers.
“We cannot say that layoffs can increase the profitability of a company. It only helps to
reduce the losses by cutting costs,” says Ramesh Shankar S, former EVP and head, HR,
Siemens.
Amit Das, director and CHRO, Bennet & Coleman, adds, “It certainly reduces the fixed cost
in the short term but the implications arising out of the negative internal and external
environment, impact on reputation and goodwill, low morale and productivity, make the
objective of ensuring profitability in a sustained manner extremely difficult.”
At the end of it all, we are still left with one question — Are layoffs necessary? Isn’t there
another way to come out of bad times?
Let us take a classic example of an airline company which has never laid off a single
employee in 40 to 45 years, that is, since its inception. Southwest Airlines, a US based
company did not lay off a single employee even during the great recession period when many
of its competitors were ‘forced’ to do so.
Experts say that no company wants a layoff to happen and it is a last option.
According to Shankar, in a manufacturing industry, material cost sums up to around 60-70

per cent of the total cost, and the cost of human resource is only 5 to 10 per cent.
“Nowadays companies tend to measure profits on a short-term basis rather than focusing on
the long-term impacts. Whenever they witness losses in back to back quarters, the
shareholders and investors pressurise the management to take some major steps. Hence, they
resort to laying off people as a short-term remedy rather than thinking about the long-term
impact. I think it is foolish to do so. Layoffs should be the last option,” opines Shankar.
Shankar suggests that rather than laying off people companies should look to minimise the
major costs, which can differ from sector to sector. And if not fulltime employees,

organisations can hire part-time, third-party or contractual employees to reduce the impact of
unemployment.
Some may still argue that during layoffs mostly underperformers and disgruntled employees
are targeted, which allows the organisations to increase productivity while claiming to have a
positive effect on the corporate culture. But the fact remains that you cannot expect
productivity from the remaining employees as their morale is already down and some may
also be deeply affected by the thought of losing their friends and co-workers.
“Such actions taken only during the layoff time will have no positive impact on corporate
culture if not the reverse. We cannot expect to go for interior decoration when the house is on
fire”. Nevertheless, a well-structured identification process backed by robust communication
and adequate support during exit process helps to reduce the pain and the inevitable negative
impact on the organisation’s reputation, besides low internal employee morale,” advises Das.
Hari T.N, head-HR, BigBasket, adds, “Companies can and should use these opportunities to
clean up and take the tough calls. Good times often lead to bad management practices
because they tend to get hidden, and bad times force companies to review their bad practices
and clean up.”

CHAPTER – IX: RESEARCH METHODOLOGY
This is a research dissertation that analyzes and systematizes particular issues of layoff in
labour administration. In the examination, research that is important to society is highly
evaluated, for example, research that can be expected to contribute betterment of labour
administration. This type of dissertation can include research on the effects of layoff among
the workforce and its meaning from a new viewpoint, research that considers the position and
future course of an labour administration with reference to in its social and historical context,
and research related to an information system from the perspective of technology or history
of labour administration (in connection with layoff issues) by investigating and analyzing
examples. The dissertation focuses on:
 Analyzes the impact on society of a layoff by analysing case studies.
 Evaluates the effectiveness of specific solutions in the issue of layoff in labour

administration through the investigation and analysis of it.

CHAPTER – X: ANALYSIS AND INTERPRETATION
CASE STUDY 1
This case study presents a fictitious scenario about a company facing the prospect of laying
off 10% of its workforce then follows with recommendations from three experts. The 10%
workforce reduction was presented as a requirement to “keep profits in line with Wall
Street’s expectations”. Should early retirements be forced? Should a performance-based
layoff of the bottom 10% be enacted? Should the newest employees be laid of first? Are there
any other options? These are some of the questions this Case Study poses.
In my experience, I have found one of the biggest dangers with layoffs to be hurting
employee morale and, ultimately, customer service. The company in the Case Study, Astrigo,
kept several million dollars in the bank in case of acquisition opportunities. I think this would
be a of, at least, part of that fund to invest in the employees and hope things turn around in
the extra time the cash could buy the company in avoiding layoffs. This would go a
long way toward showing the employees that the company cared about them and, as long as a
not-too-large proportion of the cash was used, this would be a good option.
I think layoffs, while generally unfortunate, can oftentimes be turned into a (big picture)
positive thing and a leaning ‘fitness plan’ or ‘diet’ for companies. It can be an opportunity to
trim out some of the fat and make the company leaner, healthier and more higher-functioning.
The layoffs must be done with care, compassion and empathy but sometimes must be done
and can be done in a good way; the layoff does not necessarily have to be a (big picture) bad
thing.
One of the experts, Bob Sutton of Stanford University had what I thought was some great
advice and worth repeating: “A single big layoff is tough on everyone but does a lot less
damage than seemingly endless rounds of unpredictable ones.” This certainly makes sense
when viewed under the fact that the unknown and change (even good change) is stressful to
people. Most would rather have bad news up front than constantly and endlessly wonder and
worry and have their imaginations at work on it. If layoffs become inevitable, all at once does

seem to make sense. This goes to show that the way management handles a situation (not just
the characteristics of the situation itself) go a long way to influencing the effects.
CASE STUDY 2 K.T. Rolling Mills (Private), vs Meher M.R. And Ors. : (1962) IILLJ 667
Bom : The tribunal held that the workmen were not entitled to lay-off compensation under
Chap. VA of the Industrial Disputes Act, where the order to pay compensation by the labour
court was declared illegal as in that establishment there were less than 50 workmen.
CASE STUDY 3 Workmen of The Straw Board v M/S. Straw Board Manufacturing (1974)
I LLJ 499 (SC) The Tribunal Court held in favour of the Company and stated that the closure
was legitimate and it was not a case of lay-off, retrenchment or lock-out. The Tribunal further
held that since it was a legitimate closure, the question of compensation could not be
determined by it and the workmen were not entitled to any relief.
CASE STUDY 4 Workmen Of M/S Firestone Tyre & . vs Firestone Tyre & Rubber
Company 1973 Lab IC 851 (SC) If, however, the terms of employment confer a right of lay-
off on the management, then, in case of an industrial establishment which is governed by
Chapter VA. Compensation will be payable in accordance with the provisions contained
therein. The sections dealing with the matters of lay-off in chapter VA is however applicable
to certain type of industrial establishment. Where, the number of workmen was only 30, there
were no standing orders certified under the industrial employment “standing orders” Act,
1946 nor was there any term of contract of service conferring any right of lay-off, the
workmen must be held to be laid off without any authority of law or power in the
management under the contract of service. Such a case goes out of chapter V A.
INTERPRETATION
When layoffs seem inevitable, hopefully businesses look at other, bigger picture, solutions
before considering layoffs and only use them as a last resort. Oftentimes, there are other
options that go unconsidered: tap a rainy-day fund, across–the-board salary cuts, etc.

 CEO’s being affected by their decisions and by financial problems sends a good signal
to employees and, conversely, a CEO being unaffected by a company’s financial problems
sends a signal that is very deleterious to morale.
 Clear communication with employees and explaining why decisions that were made
were made is important.

CHAPTER – XI: FINDINGS & SUGGESTIONS &
CONCLUSION
1. Bringing more awareness/awakening amongst the worker class regarding the socially
beneficial legislations like the Industrial Disputes Act, Workmen’s Compensation Act, etc.
Emphasizing, on the various benefits available to them like that of the of retrenchment lay-off
provisions, the retrenchment, lay-off compensation, right of claiming compensation in cases
of retrenchment, lay-off.
2. No doubt, almost every Industry has their own Human Resources Department/ Personnel
which undertake the matters relating to legal aspect of the Unit. But more stress must be
given on solving the grievances/disputes of the workmen on justified reasons in cases relating
to retrenchment, lay-off compensation.
3. Usually, the workmen hesitate to discuss about their grievances/problems, victimization

due to some sort of fear in their minds against the Management/ Employer, hence the
workmen must be encouraged to approach to the competitive authority with their
grievances/disputes in such cases and bring amicable solution between the parties which is
beneficial to both, i.e. the Management and the workmen.
4. Sometimes the workmen do approach the competitive authorities for the redressal of their
grievances/disputes of retrenchment, lay-off compensation, but take back at some stage for
one or the other reasons like settlement, compensation, or victimization.
5. The Trade Union has a vital role to play in solving the disputes relating to retrenchment,
lay-off compensation at the root level and bring amicable solution between the parties under
justified reasons, beneficial to the management and the workmen.
6. The hierarchy of Authorities under the Act must be more vigilant, supportive, co-operative
with the workmen grievances and make them realize that they shall be compensated for their
grievances on justified reasons and will not fall prey to victimization of retrenchment and lay-
off.
7. We have very few instances on retrenchment, lay-off compensation compared to other
States in India, so the procedure of disposal of cases must be speedy based upon the

circumstances of the case and simultaneously compensated in cases of retrenchment and lay-
off.
8. The implication of highly advanced technology in the Industries must be a boon to the
workmen and sought more benefits and not result to the detriment of the workmen leading to
retrenchment, lay-off of the workmen.
9. Some beneficial schemes must be encouraged for the benefit of the retrenched and laid-
off workmen, so that the pains of sudden loss of earnings does not affect the livelihood of
the workmen and their dependents and they did not feel neglected or in secured in the
society.
Conclusion
Industry must find due emphasis, for a country to develop/prosper and be modern. It is non-
refutable that the development of industry is correlated to labour contentment. Therefore, to
achieve this, our country aims to create a welfare State on a socialistic pattern of society as
expressly embodied in our Constitution of India. The need for exclusive and independent
legislation was felt the need of the hour especially in country like ours whose bulk population
consists of the labour class and there is every possibility of them being exploited due to their
illiteracy/ignorance, ready to accept any sort of jobs for their livelihood for mere existence
and ultimately dominated by the employers/capitalists for their selfish motive to exploit the
labour class. By then it was well accept fact that the growth of national economy and
development depends upon the industrial growth which is in turn dependent upon the
peaceful/harmonious relationship between the employer and employee. With this view
various socially beneficial legislations like the Industrial Disputes Act, Workmen’s
Compensation Act, Payment of Wages Act, etc have been enacted from time to time along
with the amendments which would suit with the day to day changing trend. As a
consequence, the common law right of an employer to discharge and dismiss an employee,
popularly known as the right to ‘hire and fire’ has been subject to various statutory
limitations and conditions.

The growth of industrialization, especially the renaissance in the industrial technology has
increased the demand for labour manifold. The general awakening amongst the people has
brought about a greater awareness of rights and personal importance.
The labour consciousness has resulted in organizing itself manifesting in unions and
societies. The conscious tendency in some of the capitalist class towards their exploitation,
the rising costs of living and increase in the standard of life, have found echo in greater
demands for better wages and amenities.
The Industrial Disputes Act, 1947 and the timely amendments in the Act, especially the
provisions relating to the retrenchment, lay-off compensation has proved to be of great
advantage to the workmen, in a country like India, wherein the bulk population is constituted
of the labour class. These workmen are solely dependent upon their wages for their
livelihood. So taking into consideration the essence of wage earnings to the workmen for
their livelihood, the legislature has amended the principal Act and inserted provisions relating
to retrenchment, lay-off compensation, definition, procedure to be followed in such cases,
conditions precedent for retrenchment, lay-off, right of workmen to claim compensation,
exceptions to compensation, reinstatement of a retrenched workman, relief in unjustified
circumstances. The insertion of chapter V-B in the year 1976 by an amendment, special
provisions relating to lay-off, retrenchment has been incorporated.
Employers used these weapons (Retrenchment and layoff) commonly known as the
“Downsizing Policy”, to lessen their workforce due to heavy expenses, company defaulter,
downs in business etc. In both techniques employees are terminated from” first come last go
and last come first go method” But the difference between these two is that retrenched
employees are promised legally that they will be recalled on job (last go first come method)
when the conditions of business gets better but in layoff employees are terminated without
any such promise after paying all their legal dues.
The employees should be informed well in advance about the layoffs. Prior warning or
informing about the layoffs creates a chance for the employees to revolt against the
Management, cause damage or sabotage to the machinery and valuable assets of the
company. This impact can be reduced by providing the employees with retraining and
offering them adequate compensation and benefits.

Although the Industrial Disputes Act is a piece of social beneficial legislation enacted for
providing social security to the workmen, which constitutes the bulk population of the
society, it is seen that the workmen are rather targets of victimization at the hands of the
mighty Management/Employer. The workmen are retrenched, laid-off and paid petty amount
as compensation on the pretext of economic conditions or settlement compensation. The
workmen due to sudden loss of earnings are left in the deteriorating economic conditions
since their sole source of wage earnings is lost. They are victims either of the highly
advanced technology, unjustified discrimination, illegal termination, etc. Although, due to
retrenchment, lay-off compensation, they are compensated to some extent, but that amount is
meagre compare to their earnings from actual service.
Most of the cases of retrenchment, lay-off are due to illiteracy, ignorance, victimization,
unjustified discrimination, illegal termination at the hands of the mighty Management, flimsy
role of Trade Union Officials. The Workmen are retrenched, laid-off by the Management on
various pretexts of economic conditions, inability, no confidence, non-renewal of service
contract, without complying with the provisions of the retrenchment and lay-off
compensation as per the provisions of the Industrial Disputes Act. In such cases, only those
who are vigilant of their rights and in search of justice approach the concerned authorities
whereas others are ignorant of their rights and mutely sustain the injustices meted to them.
Some workmen withdraw their demands and goes for petty settlement at some middle stage
of the disputes, especially when they realize that they cannot succeed the mighty
management.

CHAPTER – XII: APPENDIX AND REFERENCES
1. P. L. Malik – Industrial Law – 22 Edition

nd
2. Prof K.M. Pillai – Labour and Industrial Laws 11 Edition 2007

th
3. S. M Chaturvedi – Labour and Industrial laws- 13 Edition Central Law Agency

th
4. Dr Avtar Singh – Introduction to Labour and Industrial laws 2 Edition 2008

nd
5. S.N. Mishra- Labour and Industrial Laws 24 Edition Central Law Publication
th
6. O.P.Malhotra- Labour and Industrial Law – Vol 2
7. Journal of Leadership & Organizational Studies Volume 15 Number 1 August 2008; Baker College
8. Mc Elhaney Structural LLC - Harvard Business Review Case Study—The Layoff
9. The Effects of Organizational Downsizing and Layoffs on Organizational Commitment: A Field

Research Dr. Asuman Akdogan, Professor, Erciyes University, Turkey; Ayse Cingoz, Research Assistant,
University of Nevsehir, Turkey
10. University of West Florida: Literature Review: Conducting & Writing

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A STUDY ON THE IMPACT OF LAYOFF

AMONG THE WORK FORCE

TAMIL NADU INSTITUTE OF LABOUR STUDIES

In partial fulfilment of the requirements for the award of the degree of

Diploma in Labour Laws with Administrative Law

Register No: DLL 1965

UNDER THE GUIDANCE OF

TAMILNADU INSTITUTE OF LABOUR STUDIES

Signature of the Guide

A Study On The Impact Of Layoff Among The Work Force 2

I express my heartfelt thanks to Dr. V. Balaraman, M.A(Econ); M.A(Hist), M.A(Eng);

It is my privilege to express my professional sense of guidance to our Director Mr. K.

It is my privilege to express my professional sense of guidance to our Deputy

A Study On The Impact Of Layoff Among The Work Force 3

A Study On The Impact Of Layoff Among The Work Force 4

A Study On The Impact Of Layoff Among The Work Force 5

Similarly, a laid-off worker may become unemployed as part of a "workforce reduction,"

A Study On The Impact Of Layoff Among The Work Force 6

A Study On The Impact Of Layoff Among The Work Force 7

NEW CONCEPT OF LAY-OFF

A Study On The Impact Of Layoff Among The Work Force 8

A Study On The Impact Of Layoff Among The Work Force 9

A Study On The Impact Of Layoff Among The Work Force 10

(5) Collective bargaining.

A Study On The Impact Of Layoff Among The Work Force 11

3) Strikes and Lock-outs are prohibited:

5) In case of lay-off or retrenchment of workmen the employer is required to pay

7) A number of authorities such as Works Committee, Conciliation Officers, Board of

A Study On The Impact Of Layoff Among The Work Force 12

A Study On The Impact Of Layoff Among The Work Force 13

(i) A factory as defined in the Factories Act, 1948; or

A Study On The Impact Of Layoff Among The Work Force 14

(iii) A “plantation” as defined in the Plantation Labour Act, 1951.

A Study On The Impact Of Layoff Among The Work Force 15

Thematic Literature Review has been conducted in this dissertation

A Study On The Impact Of Layoff Among The Work Force 16

A Study On The Impact Of Layoff Among The Work Force 17

A Study On The Impact Of Layoff Among The Work Force 18

5. When looking to reorganize it is important to focus on creating efficiencies by geography

Implications for HR Professionals

A Study On The Impact Of Layoff Among The Work Force 19

This article is based on the following research papers:

1. Gandolfi, F. (2008, April). Learning from the Past ‐‐ Downsizing Lessons for

2. Downsizing: What Do We Know? What Have We Learned? The Executive, Vol. 7,

A Study On The Impact Of Layoff Among The Work Force 20

“What is the impact of layoffs on individuals, organizations, families and as communities?”

Here is a summary of some of their findings.

The Emotional Impact

A Study On The Impact Of Layoff Among The Work Force 21

“Positive-thinking coping, direct-action coping, and support seeking represent control-

A Study On The Impact Of Layoff Among The Work Force 22

A Study On The Impact Of Layoff Among The Work Force 23

A Study On The Impact Of Layoff Among The Work Force 24

 Communications necessitated by downsizing.

 Adjusting compensation and benefits.

 Maintaining engagement and satisfaction.

 Retaining and rehiring.

 Maintaining customer relationships.

 Evaluating systemic and individual performance.

 Recession or other widespread business decline.

A Study On The Impact Of Layoff Among The Work Force 26

 Mergers and acquisitions.

 Competitors' cost cutting through actions such as offshoring and outsourcing.