Conditions for terminating the services of an employee, payment or service compensation for termination, retirement, resignation, disablement, etc., and payment of subsistence allowance for the period of suspension.

(1) No employer shall, without a reasonable cause terminate the service of an employee who has been in his employment continuously for a period of not less than six months without giving such employee atleast one month’s notice in writing or wages in lieu thereof and in respect of an employee who has been in his employment continuously for a period of not less than one year, a service compensation amounting to fifteen days average wages for each year of continuous employment: Provided that every termination shall be made by the employer in writing and a copy of such termination order shall be furnished to the Inspector having jurisdiction over the area within three days of such termination. (2) The service of an employee shall not be terminated by the employer when such employee made a complaint to the Inspector regarding the denial of any benefit accruing to him under any labour welfare enactment applicable to the establishment and during the pendency of such complaint before the Inspector. The services of an employee shall not also be terminated for misconduct except for such acts or omission and in such manner as may be prescribed. (3) Every employee who has put in a continuous service of not less than one year shall be eligible for service compensation amounting to fifteen days average wages for each year of continuous employment, (i) on voluntary cessation of his work after completion of 60 years of age. (ii) on his resignation, or (iii) on physical or mental infirmity duly certified by a Registered Medical Practitioner or (iv) on his death or disablement due to accident or disease: Provided that the completion of continuous service of one year shall not be necessary where the termination of the employment of an employee is due to death or disablement: Provided further that in case of death of an employee service compensation payable to him shall be paid to his nominee or if no nomination has been made to his legal heir. (4) Where a service compensation is payable under this section to an employee, he shall be entitled to receive his wages from the date of termination or cessation of his services until the date on which the service compensation so payable is actually paid. (5) The payment of service compensation under this section shall not apply in cases where the employee is entiled to gratuity under the Payment of Gratuity Act, 1972 and gratuity has been paid accordingly consequent on the termination or cessation of service.

(6) Where an employee is placed under suspension pending enquiry into grave misconduct the employer shall pay a subsistence allowance equivalent to fifty per cent of the last drawn wage for the first six months and at seventy five per cent of the last drawn wage beyond six months during the period of suspension. The total period of suspension shall not however exceed one year in any case. If the misconduct is not established or the total period of suspension exceeds one year, the employee shall be entiled to full wages during suspension period and the period of suspension shall be treated as on duty.

Explanation:- (1) For the purposes of this section:-

(a) the term „employee‟ shall include part-time employee also;

(b) the expression „average wages‟ means the daily average of wages for the days an employee actually worked during the thirty days immediately preceding the date of termination or cessation of service;

(c) the expression „wages‟ does not include over-time wages;

(d) an employee in an establishment shall be deemed to have been in continuous employment for a period of not less than six months if he has worked for not less than one hundred and twenty days in that establisment within a period of six months immediately preceding the date of termination or cessation of the service of that employee;

(e) where the total continuous employment is for a fraction of a year or extends over a fraction of a year in addition to one or more completed years of continuous employment, such fraction, if it is not less than a half year shall be counted as a year of continuous employment in calculating the total number of years for which, the service compensation is to be given;

(f) the service compensation of an employee whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to or destruction of property belonging to the employer, shall be forfeited to extent of the damage or loss caused;

(g) „disablement‟ means such disablement which incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) An employee who has completed the age of sixty years or who is physically or mentally unfit having been so declared by a Registered Medical Practitioner or who wants to retire on medical grounds or to resign his service may give up his employment after giving to his employer notice of atleast fifteen days and where no such notice is given, the service compensation payable to him shall be forfeited to the extent of fifteen days in lieu of the notice.