Separation involves ending the employment relationship with an employee. Simply, it can be denoted by ‘termination Of employment’. It is also known as employee turnover. The employment Of an employee is terminated when an employee even after getting the notice is not in a position to improve his/her performance or when an employee behaves in an unethical manner or involved in any type of misconduct, Employees are separated from their job due to resignation, lay-off and dismissal. In sick industries and loss-making business ventures, separations are most commonly visible. When the market demands are not adequate, it leads to decrease in activities of production, thereby leading to separation of employees. Both the parties (employer and the employee) feel the pain Of separation. Therefore, separation should be managed carefully.
Types/Methods of Employee Separation
There may be voluntary or involuntary reasons for separation of the employees, which are as follows:
Voluntary Separation
When an employee decides himself to end up his relationship with the organisation, it is called voluntary separation. Resignation and retirement are the most manifestations Of voluntary separations which are explained as follows:
Resignation: Resignation is a particular situation when an employee takes himself the decision of leaving his job or he is forced by the organisation to quit his job. In case Of voluntary resignation, the employee decides to quit his job on his own. On the other hand, resignation is involuntary when the employer asks the employee to leave his job or face disciplinary procedure. Although in the ease of disciplinary action, the domestic enquiry process should be followed instead of forcing an employee to resign from the job. The main reason for this is that if a domestic enquiry process is not followed then the employee can seek union help or can approach the court and claim that the resignation was forcefully obtained from him. If the organisation is facing a high frequency of resignation, then it must conduct exit interviews in order to know the actual causes of such frequent resignations.
Retirement: Retirement is the process of separation of employees from the organisation when they have reached at a predetermined age. The predetermined age in organisations is usually 58-60 years. When an employee attains this age, he is discharged from rendering his services to the organisation. It is the sole responsibility of an organisation to have clear rules for the process of retirement. The organisations should also assist the employees to adjust after retirement. The problem of unemployment is solved through retirement because when the employees of an organisation retire, the job positions become vacant thereby providing an opportunity to the fresh candidates to apply for the vacant positions and grab the job. Retirement is an important phase in the life of an employee and it also leaves a significant effect on the organisation where he has devoted many years of his life. Therefore, a retired employee must be honoured and various retirement benefits like gratuity, insurance, provident fund, etc., must be given to him as soon as possible. Some organisations also give monthly pension to its retired employees, alongwith the other benefits.
Involuntary Separation
When the employer asks the employee to leave the organisation, it is called involuntary separation. In such case, the employee feels that he has been treated unfairly and he looks for the legal protection to tackle it. Involuntary separations are as follows:
Lay-off: Temporary termination of the employee from his job for a certain period of time is known as lay-off. After the fixed time duration, the employee can re-join work on being called by the employer.
Dismissal or Discharge: Dismissal is a punishment, in which the service of the employee is terminated due to serious misconduct. This ultimate punishment is given by the employer to his employee to correct his undisciplined behaviour. Dismissal is a permanent separation and dismissed person is not able to get a job somewhere as it carries a stigma.
Retrenchment: Retrenchment can be defined as the termination of service due to surplus labour. As per the latest amendment, non-renewal of contract is not to be considered as retrenchment. Thus, it can be concluded that every retrenchment is termination of services, but all service terminations cannot be called retrenchment. Retrenchment is different from dismissal. Dismissal takes place because of one’s own fault but on the other hand retrenchment is forced on both the employees and the employer. In retrenchment, the termination of services of many employees takes place but in dismissal generally termination of service Of only one or two employees takes place.
Voluntary Retirement Scheme (VRS): VRS can be defined as a method used to reduce the present workforce of the company. In this method, the employee is persuaded to voluntarily retire from the organisation. It is also called as “Golden Handshake”. Generally, the employees who have attained the age of 40 are eligible for voluntary retirement. However, the eligibility criterion for the voluntary retirement scheme is different in different organisations. Except the Directors of the company, this scheme is applicable to all the employees including workers and executives.
Rightsizing/Downsizing: When there is surplus Of employees in an organisation, then the organisation plans to eliminate some of the job positions which are no more required in the organisation. This method of removing the job positions, thereby reducing the size of the organisation is known as rightsizing/downsizing. Due to the process of rightsizing/downsizing, the employees who are not required anymore are removed from the organisation. The main purpose behind rightsizing is to improve the efficiency Of work.
Costs of Employee Separation
The costs of employee separation depend on whether managers intend to eliminate the position or to replace the departing employee. Some of the costs involved in replacing an employee are as follows:
Recruitment Costs: The costs associated with recruiting a replacement may include advertising the job vacancy and using a professional recruiter to travel to various locations (including college, campuses). To fill executive positions or technologically complex openings, it may be necessary to employ a search firm to locate qualified individuals, who most likely are already employed. A search firm typically charges the company a fee of about 30 per cent of the employee’s annual salary.
Selection Costs: Selection costs are associated With selecting, hiring, and placing a new employee in a job. Selection can involve interviewing the job applicant. which includes the costs associated with travel to the interview site and the productivity lost in organising the interviews and arranging meetings to make selection decisions. For example, a law firm’s decision to hire a new associate may involve the participation of many junior associates as well as senior partners. Each of these lawyers may charge clients hundreds Of dollars per hour for his or her time. If several meetings are called after the interviews are completed, these lawyers lose valuable time that they could have spent working for their clients. Other selection Costs involve testing the employee and conducting reference checks to make sure the applicant’s qualifications are legitimate. Finally, the company may have to pay relocation costs, which include the costs of moving the employee’s personal property, travel costs, and sometimes even housing costs. Housing costs may include the costs of selling one’s previous house ‘and the transaction costs of buying a house in a more expensive market.
Training Costs: Organisations incur costs in providing new employees with the knowledge necessary to perform on the job. Most new employees need some specific training to do their job. For example, sales representatives need training on the company’s line of products. Training costs also include the costs associated with an orientation to the company’s values and culture. Also important are direct training costs-specifically, the cost of instruction, books, and materials for training courses. Finally, while new employees are being trained, they are not performing at the level of fully trained employees, so some productivity is lost.
Compensation Costs: A company incurs separation costs for all employees who leave, whether or not they will be replaced. The largest separation cost involves compensation in terms of pay and benefits. Most companies provide severance pay (also called separation pay) for laid-off employees. Severance pay may add up to several months ‘ salary for an experienced employee.
Benefits of Employee Separation
Benefits of employee separations to the organisation include the following:
Minimises Cost of Labour: By separating the employees, an organisation can reduce its cost of labour. However, the cost of layoff is considerable, but the money which is saved by separating the employees from an organisation can be used for lay-off in order to compensate the expenses occurring from lay-offs.
Helps in Replacing Low Performers: It is very important for an organisation to identify the poor performers of the organisation and thereafter helping them by providing training or by engaging them in skill development to make their performance better. But still, if the feedback is negative after providing training, then it is better to terminate that poor performer and replace him with a skilled employee. Thus, the benefit of separating a poor performer is to create job opportunities for new and skilled workers.
Promotes Innovation: Advancement opportunities are created for high performing individuals from separation. As the employees are promoted within an organisation, the entry level jobs are created thereby giving an opportunity to the new employees to enter the organisation. These new employees may include fresh graduates who may become a source Of innovation to an organisation as they have knowledge about the latest researches and technologies or are expert engineers or experienced managers from various renowned research laboratories.
Facilitates Workforce Diversity: Another benefit of separation is to create job prospects for the employees from different cultural and gender composition. The benefit of hiring a diverse workforce in an organisation is to extract the advantages Of workforce diversity.
Guidelines for Managing Separation
Following are the guidelines for managing separations:
Providing the Employee with All Concerned Documents: The employee must be provided in his/her personnel file with all the documents related to dismissal along with performance appraisal reports, recommendations for improvement, warning letters, counselling memos and results Of any enquiry for misconduct. In order to avoid any surprises by the termination decision, the employee must have gone through these documents in earlier discussions pertaining to the problems.
Avoiding Legal Issues: The employers might face legal implications in case of a sudden termination of an employee Without notice. The employer can be accused Of discrimination, revengeful or wrong dismissal by the employee.
Adherence to policies and procedures: The emphasis should be laid on strict adherence to the policies and procedures of the organisations related to discipline and conduct. In addition, the employer must have an authentic ground if any irregularities are found.
Consistency in Treating Employees: Consistent behaviour toward the employees working on similar jobs, history Of performance and experience must be ensured rather than treating all the employees in the same
Complete Enquiry and Analysis: In the event of indiscipline or misconduct. the employer must undertake a deep and convincing enquiry before dismissing the employee in a hurry or after being influenced emotionally.
Respecting Employee’s Dignity and Privacy: The dignity and privacy of the employee must be given due respect. For this purpose, the termination should take place at a proper time in a superior’s office rather than the employee’s workstation or any other unsuitable place.
Proper Preparation and Record of the Meeting: The employer must be ready in advance and be specific about what has to be stated during the termination. He/she must not indulge into a discussion with the employee regarding any justification for the termination decision. The entire conversation and discussion of the meeting must be properly recorded.