Termination letter format for Indian employers

What this letter is

A termination letter ends employment at the employer initiative. What it must contain, and what must have happened before it is issued, depends on which law covers the employee. For a workman covered by the Industrial Disputes Act 1947, retrenchment carries statutory notice and compensation obligations. For misconduct under certified standing orders, a disciplinary procedure must have been followed. Getting the category wrong is the expensive mistake, and it is made before the letter is drafted.

When to issue it

After the applicable process has been completed, not as the opening move. If the ground is misconduct, that means after the enquiry. If the ground is redundancy and the employee is a workman with the qualifying service, that means after the statutory notice and compensation have been worked out.

Everything in square brackets is yours to replace. Read the section below on what this letter must contain before you send it, because the template is the easy half.

[COMPANY LETTERHEAD]

Date: [DD/MM/YYYY]

[EMPLOYEE NAME]
[EMPLOYEE CODE]
[ADDRESS]

Subject: Termination of employment

Dear [EMPLOYEE NAME],

This is to inform you that your employment with [COMPANY NAME] as [DESIGNATION] is terminated with effect from [DD/MM/YYYY].

Ground: [STATE THE SPECIFIC GROUND. For misconduct, refer to the charge sheet dated DD/MM/YYYY, the enquiry held on DD/MM/YYYY and its findings. For retrenchment, state the reason for the retrenchment as required by law.]

Notice: You are being given [NUMBER] days written notice as required under [YOUR APPOINTMENT LETTER / THE APPLICABLE STATUTE]. [Or: In lieu of notice, you will be paid Rs [AMOUNT], being [NUMBER] days wages.]

Settlement: Your full and final settlement comprising salary up to [DD/MM/YYYY], encashment of [NUMBER] days of accrued leave, [statutory compensation of Rs AMOUNT where applicable], [gratuity of Rs AMOUNT where payable], less lawful recoveries of Rs [AMOUNT] on account of [REASON], will be credited to your account by [DD/MM/YYYY].

Company property: Please return [LIST ITEMS] to [NAME] on or before [DD/MM/YYYY].

Your experience certificate will be issued on [DD/MM/YYYY].

For [COMPANY NAME]

[SIGNATURE]
[NAME]
[DESIGNATION]

Received:

Employee signature: ______________    Date: ____________

What it must contain

• The ground for termination, stated specifically.
• The effective date of termination.
• Whether notice is being given or pay in lieu of notice is being made, and the amount.
• A statement of the settlement: salary to date, leave encashment, any statutory compensation, gratuity where payable, and any lawful recoveries.
• What must be returned, and by when.
• Reference to the process already followed, such as the enquiry and its date, where the ground is misconduct.

The law behind it

India has no single statute governing employment letters. The obligations sit across state Shops and Establishments Acts, which differ from each other, and a handful of central acts that apply to some employers and not others. Each note below names its source and who it applies to.

• Section 25F of the Industrial Disputes Act 1947 requires, for retrenchment of a workman who has been in continuous service for not less than one year, one month written notice stating the reasons or wages in lieu, and compensation of fifteen days average pay for every completed year of continuous service or part thereof in excess of six months. Continuous service for a year is defined in section 25B and turns on days actually worked, commonly summarised as two hundred and forty days in the preceding twelve months.
• Whether someone is a "workman" under section 2(s) of the Industrial Disputes Act depends on the nature of their duties, not their job title or their salary. People in mainly managerial or administrative roles fall outside it. This is the classification question that decides which obligations apply, and calling somebody an executive does not settle it.
• For establishments covered by the Industrial Employment (Standing Orders) Act 1946, dismissal for misconduct generally requires the procedure in the certified standing orders, normally a charge sheet, an opportunity to explain and a domestic enquiry. Skipping it is the most common reason a termination is set aside.
• Section 5(2) of the Payment of Wages Act 1936 requires wages payable on termination to be paid before the expiry of the second working day, for employees the Act covers. Statutory dues such as gratuity under the Payment of Gratuity Act 1972, where five years of continuous service has been completed, are separate and have their own timelines.

The mistakes that cost money

• Never establishing whether the employee is a workman under section 2(s) of the Industrial Disputes Act. Everything downstream depends on that answer and job titles do not decide it.
• Terminating for misconduct without the enquiry that certified standing orders require. Where they apply, the procedure is not optional and its absence is the usual reason a dismissal is set aside with back wages.
• Calling a retrenchment a resignation. Pressuring somebody to resign to avoid section 25F is a well-recognised pattern and is treated as what it is.
• Omitting the reason. Section 25F requires the notice to state the reasons for retrenchment, and a vague letter invites a finding that the real reason was one you could not state.
• Delaying the settlement. Where the Payment of Wages Act applies, wages payable on termination are due before the expiry of the second working day.

Questions people ask

The letters that go with this one

Where the details for this letter come from

Half the fields in this template are ones you already hold somewhere: date of joining, designation, salary structure, leave balance, notice period. Shiftelio keeps them in one employee record alongside attendance and payroll, so the figures you type into this letter are the figures the payslip used.

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