In a first, the Terminated Employees (Welfare) Bill, 2020 is introduced to ensure employers provide terminal benefits and other facilities to employees who have been terminated

On 7th February, 2020 the Terminated Employees (Welfare) Bill, 2020 (“Bill”) was introduced in the Rajya Sabha. It is a *Private Member Bill which seeks to provide welfare measures for the employees who have been terminated by the employers and the matters connected with it.

Along with regular employees, the Bill seeks to protect temporary or casual workers who have been employed through a contract by bringing them under the purview of a “terminated employee“.

However, the Bill will not apply to any employee who has been terminated for proven misconduct or cheating or indulging with fraudulent means and appropriate money; or having been found guilty by a criminal court of justice.

An “employer” under the Bill will only include an owner or the director of any establishment or any organization where minimum ten persons are employed and which is not owned by the Government (Central or State) in any manner.

Key takeaways from the Bill:

  1. Benefits to terminated employee:
  2. An employee whose employment is terminated for the reasons of the winding up of the organization or the establishment due to the following will be entitled tounemployment compensation health insurance benefits for a period of nine monthsor till the time the employee gets employed elsewhere, whichever is earlier:

(a) economic slowdown;

(b) change in technology in the respective field;

(c) the owner or director managing the affairs of the establishment becoming insolvent;

(d) the orders of any court;

(e) incurring losses and unable to carry on the business;

(f) the change in Government policy

Please note that the Central Government reserves the power to prescribe any benefit for the terminated employee if such benefits are not a part of the employee employer agreement.

  1. The period of nine months for which the employer has to pay compensation to the terminated employee willinclude the notice period to be served by the employer before termination.

iii. The unemployment compensation will be applicable if the employer does not provide any severance package to the terminated employee or the severance package is less than the compensation proposed to be provided under this Bill. Moreover, the unemployment compensation must not be less than 60% of the gross salary of the terminated employee or as per the terms of the employee-employer agreement, whichever is higher.

The entire compensation has to be borne by the employer.

  1. The terminated employee will also be entitled to terminal benefits likeprovident fund, gratuity, leave encashment etc.
  2. The Bill proposes to impose a duty on the employer to provide the benefits to the terminated employeesfrom the month following the month on which termination is communicated to the employee or completion of the notice period, if any, whichever is earlier.

On failure to pay the benefits, the employer has to pay to the terminated employee an interest at the rate of 12% per month for such delay.

  1. Creation of fund for welfare of terminated employees:
  2. The Bill proposes that every employer has to create a “corpus fund”to which at least5% of the net profit of the organization must be credited.
  3. The amount credited to the fund will be used for the welfare of terminated employees.

iii. The Bill entitles an employer to solicit contribution from any organization, individual or trust for the purpose of maintaining the fund.

  1. The Bill further proposes that the fund will also be utilised for:

(a) payment of expenditure in connection with the education of the children of the terminated employees;

(b) medical facilities, free of cost, in such a manner as may be prescribed.

  1. Further, the Central Government will provide funds for carrying out the provisions of the Bill.


In the recent times when public sector has significantly shrunk and private sectors are emerging, it is observed that employees face undiminished threat of losing jobs and live in a climate of uncertainty. Things become worse when they are relieved from jobs without any substantive compensation.

At present there is no law to ensure that the employers provide terminal benefits in time and which makes provision for education, medical facilities etc., to the families of the terminated employees.

In light of the present situation, the Bill has been proposed.


*Private Member Bill: A private member bill can be introduced in any house of the Parliament by any private member other than a Minister. A private member bill has a lesser chance of approval in the Parliament.

Source: Rajya Sabha


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