Redundancy
Also known as: Retrenchment
Redundancy occurs when an employer no longer needs a particular job to be done, so the role — and the person in it — is let go for reasons unconnected to how well the individual performed. It typically follows falling demand, restructuring, automation, a site closure, or the transfer of work elsewhere. Because the trigger is business need rather than fault, redundancy is generally handled through a fair process and comes with defined notice and financial entitlements.
A defensible redundancy process usually involves identifying the genuine business reason, defining the pool of affected roles, applying objective selection criteria, consulting affected employees, considering suitable alternative roles, and paying the required notice and severance. Getting this wrong — for example using redundancy as cover for removing a specific individual, or skipping consultation — can turn a lawful redundancy into an unfair or unlawful dismissal.
In India the equivalent concept is retrenchment, which is closely regulated. Under the Industrial Disputes Act, 1947 (and, once fully in force, the Industrial Relations Code, 2020), retrenchment of covered “workmen” generally requires notice or pay in lieu, retrenchment compensation calculated on length of service, and adherence to the “last in, first out” principle within a category unless there is a valid reason to depart from it. Larger industrial establishments above a threshold headcount may also need prior government permission before retrenching. These protections make redundancy in India a more procedural, compensation-heavy exercise than in at-will jurisdictions, and GCCs restructuring teams need to plan for notice, severance, and process carefully.
Frequently asked questions
What is the difference between redundancy and dismissal for performance?
Redundancy ends a job because the role is no longer needed, for reasons such as restructuring, reduced work, or a site closure, and is not about the individual’s performance. Dismissal for performance or conduct targets the person because of how they did the job. The two follow different processes and different compensation rules.
What is redundancy called in India?
In India, redundancy is generally known as retrenchment. It is regulated under the Industrial Disputes Act, 1947 (and the Industrial Relations Code, 2020), which sets out notice, retrenchment compensation based on length of service, and rules such as “last in, first out” for selection within a category of workers.
Is severance pay required for redundancy?
In most jurisdictions redundancy attracts statutory or contractual severance and a notice period, because the employee is losing their job through no fault of their own. In India, retrenchment of covered workmen requires retrenchment compensation calculated on years of service, along with notice or pay in lieu of notice.
Can an employer use redundancy to remove a specific employee?
No. Redundancy must be based on a genuine reduction in the need for a role, applied through objective selection criteria and proper process. Using redundancy as a pretext to remove a particular individual can make the dismissal unfair or unlawful, and in India can be challenged as an improper retrenchment.