Why Your Company Needs A Disciplinary Policy

Employee churn and attrition are commonplace in any organization in any industry. The inflow and outflow of talent offer many benefits including the infusion of new ideas, different cultures, varied experiences, and more. However, there is also a multitude of situations that require an organization to terminate an employee’s tenure. And that is rarely a pleasant experience for those involved.

A recent case of an Indian IT company being called out for unlawful termination is a testament to the fact that having an airtight termination process is important. The firm had to pay hefty compensation to an employee who won the case on unlawful termination.

A written and easily-accessible disciplinary policy can aid with a hassle-free process for both the employer and the employee, ensuring both parties conclude their business professionally. In this blog, let’s delve into grievances redressal processes that organizations must undertake to initiate disciplinary action including the involuntary termination of an employee as stated in our labour laws.

What is a Disciplinary Policy?

A disciplinary policy is a written document that outlines how employees are penalized for their misconduct and how justified employee disciplinary actions, including terminations, are carried out within an organization. It contains processes for both voluntary and involuntary terminations.

Voluntary termination is when an employee resigns of their own free will. Involuntary termination is when an employee is fired for various reasons like misdemeanor, underperformance, layoffs and downsizing, and closure of a factory, among other things.

Having a written document that contains details of how termination is executed makes it easy for HR to carry out due process. It also sets realistic expectations for employees on what they can expect in case of disciplinary action. For instance, the disciplinary policy could lay out the usage of material created during an employee’s tenure at the company. Specifically, the policy should clarify that the material would be considered the company’s property, but any knowledge would be transferable to a new position.

Why Should You Have a Disciplinary Policy?

Although it is not mandated by law, a disciplinary policy with a list of misconduct makes disciplinary action smoother. It can also clearly outline the difference between voluntary and involuntary termination so that there is no confusion among employees.

Another perk of having a well-defined policy is that it promotes transparency within the organization. This policy can also include details such as the severance package employees are eligible for, pension payments, and any other compensation details that can keep employee morale intact. It also helps avoid legal disputes in the future.

How to Proceed With Disciplinary Action?

Disciplinary action can take several forms. For an employee who is misbehaving on underperforming, you can start with issuing a caution letter detailing their misdemeanor or underperformance. A caution letter outlines where the employee is falling back, without a threat of consequence. If that doesn’t work, you can also consider issuing a warning letter. It can include a note about possible low appraisals in the future. This ensures that the employee is aware of their shortcomings and has sufficient motivation and time to correct them.

If you notice that there is no effort from the employee’s end to correct their shortcomings, you could proceed with stronger disciplinary actions such as downgrading from an existing position or stopping their increment. If this fails as well, you may consider termination.

While there is no strict procedure to follow for employee termination, doing the following for an involuntary termination can help:

1. A Show Cause Notice that outlines the misconduct with a request for the accused employee to respond in writing.
2. Suspension Letter based on prima facie evidence. It should refer mode of application for subsistence allowance. (Usually at 50% of wages, which may be extended if disciplinary proceedings are not concluded within the specified time)
3. An investigation process with a background that emphasizes a collection of all relevant evidence/witness statements and special expert investigation, if required.
4. A charge sheet with detailed allegations and corresponding charges highlighting clauses of disciplinary policy being violated, brief of Show Cause and Suspension, and a reply to the Show Cause.
5. If the employee has accepted the charges, then based on a provision in the disciplinary policy, the Inquiry can be closed, and Final Order as per step 7 can be passed.
6. If the employee has not accepted the charges, then the following steps can be enacted:
a. Send an Intimation to Inquiry notice with details of the date and time of inquiry.

b. This intimation notice should state that the employee has the right to defend themselves with adequate proof.

c. This intimation notice should state that the employee has the right to defend themselves with adequate proof.

d. Reply of the accused on the Inquiry Report, if applicable.

7. A Final Speaking Order needs to be issued by a separate Disciplinary Authority based on the findings in the Inquiry Report. In case the employee rejects the accusations, the same must contend in detail and the passing of the order has to be justified.
8. The final Order must include the following:

1. • The effective date of order
   • Penalization/Acquittal for all/partial charges proved or not proved, based on Inquiry
   • Treatment of suspension period, if any
   • Recovery of dues from wages, if any
   • In case of Termination, reference for recovery of assets in the possession of the delinquent employee.

It would be the best practice to send all documents and letters by registered post with due acknowledgment or hand delivery with acknowledgment taken. Sending two copies – one to the employee’s residential address registered with the employer and another to the email – ensures that the employee receives the intimation.

The Inquiry Proceedings should be kept professional, fair, and impartial. Having an airtight process such as the one mentioned above will ensure that there are no legal repercussions to taking disciplinary action against an employee, which may also lead to termination.

Takeaway

Having all the necessary documents and following the right procedure when taking disciplinary action against an employee can smoothen the process and ensure it is done fairly and ethically.

Having a disciplinary policy will also ensure that employees are not penalized due to discriminatory policies or based on the personal interests of the employer.

Authored by
Shivam Chauhan