Employee separation needs to be handled with sensitivity, discretion, and speed so that exits can hap­pen without injuring the sentiment and burning bridges with the employee.

It should not be forgot­ten that the employees are the most effective brand ambassadors for the company.

The separating employee has to return all property of the company that was under his/her custody.

The entire separation process should happen smoothly and the separating employee should never feel harassed though he/she can become emotional at times. Soon after the exit interview, employees are bid farewell.


Learn about:- 1. Introduction to Employee Separation 2. Forms of Employee Separation 3. Phases 4. Factors.

Employee Separation: Introduction, Forms, Phases and Factors

Employee Separation – Introduction

Employee separation needs to be handled with sensitivity, discretion, and speed so that exits can hap­pen without injuring the sentiment and burning bridges with the employee. It should not be forgot­ten that the employees are the most effective brand ambassadors for the company.

At the time of the separation, employees of an organization present an opportunity to glean and assemble a wealth of valuable feedback and insights on the organizational strengths and weaknesses during the process of engagement between the employer and the employee.

Hence, it is important for the personnel concerned with the separation management to carefully gather all this information. These valuable insights about the organization can be collected from the departing employee through exit interviews that would help the organization to reduce future attrition.


The separating employee has to return all property of the company that was under his/her custody. The entire separation process should happen smoothly and the separating employee should never feel harassed though he/she can become emotional at times. Soon after the exit interview, employees are bid farewell.

After separation, one can pursue his/her life in multiple ways of his/her choice; such as joining another company, a social or philanthropic organization, work as an author of a reputed pub­lishing house, and so on.

Transition takes place after separation.

The operation functions of HRM consist of procurement, development, compensation, integration, maintenance and separation of employees. Employee separation occurs when the employee ceases to be a member of-the organisation. The employment agreement between the employer and the employee comes to an end when the employee leaves the organisation.


As per the Webster Dictionary, attrition is a reduction in the number of employees usually as a result of resignations, retirement or death. The other term used for attrition is employee turnover. Employees leave the organisation for various reasons and some of the reasons are- (a) compensation and benefits (b) career prospects (c) job related issues (d) organisational functioning (e) personal factors. It should be noted that there are no readymade techniques or tools to prevent employee attrition. Employee retention and engagement programmes have to become an important part of HR policies of the organisation.

In many progressive organisations, the employee who is leaving the job is treated well and the amount due to him is settled without delay. The objective is to ensure that the employee leaves the organisation with pleasant memories of his association with the company and he talks high about the organisation and its HR policies.

If the rate of separation is high, it is a sign of instability and it adversely affects the normal working and profitability of the organisation. However, a moderate turnover of employees is always good for the firm since new employees bring experience, new ideas and new outlook with them.

Employee Separation – 8 Major Forms

Form # 1. Downsizing:

Due to thrust on modernisation, technological upgradation, competitiveness, cost effectiveness, high quality products, delivery schedule, etc., many old and established industries are facing stiff competition from not only newly set up modern industries with latest machinery and equipment but even by the small-scale sector. Many of the traditional industries with obsolete machinery, high cost of production, low quality, and low productivity and over staffing are compelled to take a close look at all aspects of cost of production including utilisation of human resources.


Some of the age old industries like textiles, coal mines, steel, engineering units and even a few multinationals are forced to adopt urgent measures to rationalise their manpower. Many companies are compelled to go for a lean organisation structure by cutting down extra manpower at each managerial level. Similarly, workers with knowledge and skills are preferred in sectors like IT, finance and insurance industries.

The term Downsizing means reducing the excess manpower by suitable measures and adjusting the manpower as per the requirement of the organisation. Rationalisation of manpower of an industrial organisation is an economic necessity. This is required not only for manufacturing and service undertaking but even for offices of industrial and commercial establishments.

Reasons for Surplus Manpower in an Organisation:

a. Outdated products and changes in consumer tastes and preferences


b. Continued sluggish market conditions

c. Technological obsolescence

d. Low labour productivity and high wage cost

e. Recession in the industry


f. Stiff competition

g. Restrictions on expansion/diversification on the existing units etc.

The HR department has to prepare a suitable downsizing plan in consultation with senior managers in the organisation.

Some of the factors considered for identifying employees under downsizing plan are:


(i) Age of the employee, (ii) Educational qualification, (iii) Knowledge, skills and attitude of the employee, (iv) Past performance in the job, (v) Physical fitness of the employee, (vi) Willing to accept transfer/relocate, (vii) Willing to undergo training to upgrade knowledge and skills etc. Voluntary retirement scheme, lay off, retrenchment are some of the methods followed by companies to reduce manpower.

Right sizing of workforce means employing exact number of employees with require knowledge, skills and attitude to perform the existing jobs in an organisation. Detailed analysis of external and internal factors and job analysis are carried out to arrive at exact number of people required.

Form # 2. Voluntary Retirement Scheme (VRS):

Voluntary Retirement Scheme popularly known as Golden Handshake is one of the methods of reducing surplus labour in an organisation. The scheme is not new to our industry. In fact some of the public and private sector undertakings like Guestkeen Williams Limited have resorted to VRS for reducing their workforce as early as in 1976.

It has gathered momentum since early 1990s. A large number of companies like ITC, ACC, Blue Star, Hindustan Lever, Crompton Greaves, Atlas Capco, Mahindra and Mahindra, Ciba Geigy, Kirloskar, Sandoz, Pfizer, Batliboi, Hoechst, Commercial banks have introduced Voluntary Retirement Schemes.

Under the scheme, the organisation announces a VRS and interested employees have to apply for voluntary separation from the organisation. They are relieved as per the terms and conditions of the VRS. One of the attractions of the scheme is that the amount payable under VRS scheme is eligible for tax relief.

Compulsory Retirement or Iron Handshake:


HR department with inputs from line managers prepares a list of surplus employees and discharges them from the service without providing additional financial benefits, other than the normal retirement benefits due to the employees. Therefore, it is called compulsory retirement or ‘iron handshake’.

Requirements of Voluntary Retirement Scheme:

a. Situation analysis – VRS is introduced when it becomes a must for an employer to rationalise, restructure and reduce the manpower and when he is unable to absorb the manpower in the same unit or any of his subsidiary units and when he cannot retrench them.

b. Adequate homework – The management has to assess accurately the manpower requirements for the next five years to arrive at surplus manpower in various categories and levels of employees.

c. Top to Bottom reorganization – Reduction of manpower includes workmen, clerical staff, executives and managers in the organisation.

d. VRS scheme should be attractive enough to persuade a large number of employees to take advantage of the benefits under the scheme and leave the organisation.


e. Voluntary scheme – It should be voluntary and open to all permanent employees. It should be open to permanent employees who have put in minimum 5, 10 or 15 years of service with the company or who have 5 to 10 years left with the company depending on the age and skill mix of the employees.

f. Terms and conditions of VRS are not negotiable.

g. Announcement of VRS scheme – The scheme should be introduced formally through a notice and should be open for a period of say 1 to 3 months.

h. The acceptance of resignation should be communicated in writing.

i. The employee opting for VRS will also be eligible for all legal dues such as Gratuity, Pension, Statutory bonus, Provident Fund, Leave salary etc.

j. The company has to educate the employees as how best to reduce the tax liabilities legally.


k. To create a favourable climate and to reduce bitterness, it better to organise a farewell function to those who are leaving the company under VRS.

l. Companies can offer advice to VRS employees as to how they can utilise the funds for generating income in the coming years.

Comments on VRS Scheme:

a. Many organisations have come out with attractive VRS schemes and good performers have opted for the same. However, incompetent employees have not taken VRS and they continue to work in the organisation.

b. Many employees who opted for VRS could not take up any income generating activities and they have faced financial problems.

c. In industries such as textiles, steel, coal mines etc., poor and unskilled workers have been forced to leave the job under VRS scheme and it has affected the life of thousands of workers.


d. Though VRS is voluntary, in many cases it has become CRS (Compulsory Retirement Scheme) to weed out poor performers.

e. VRS (Golden Handshake) as a means of reduction of the manpower is an economic and business necessity and it has a social and human angle.

f. The VRS should be introduced and implemented with a human touch and with full sense of social responsibility. The human touch is necessary to make the obviously bitter pill less bitter if not a sweeter one.

Form # 3. Lay-Off:

Lay-off is a temporary separation of an employee at the instance of an employer under specific situation. Though it is temporary separation, sometimes, it turns out to be a permanent one, as production never picks up a laid off workers are not reemployed in the organisation. The longer the period of lay-off, the less the possibility that the individual will return to the organisation.

Causes for lay-off are:

a. Decline in sales,


b. Shortage of raw materials,

c. Market fluctuations,

d. Delays in production,

e. Displacement due to technology and

f. Surplus labour and high labour cost.

Three conditions are present in lay-off, i.e.:

a. No work is available for the employees,

b. No work situation is temporary and short term and

c. Management would like to recall the employees when work is again available. Therefore, lay-off is not a termination which is a permanent severing of employment.

Lay-off creates problems for the management as well as the union. The management has to ensure production as per plan. They would like to retain skilled and competent labour and the same time they have to give utmost attention the morale of the affected employees. The union is concerned with impartial ways to distribute the limited work among the members. Seniority is considered in lay­off of organised labour, other things such as ability and physical fitness being equal. In the case of unorganised labour, the management retain good performers and lay-off those who are the least efficient.

Form # 4. Discharge:

Discharge is permanent separation of the employee from the payroll of the company frequently due to some incompetence or offence by the employee. The reasons for discharge may be willful violation of rules, insubordination, dishonesty, violent and aggressive acts, inefficiency, unauthorised absence from duty for a long time, alcoholism etc. Discharge is the most stressful method of separation of an employee.

The employee is considered to be unsatisfactory in performance or attitude. In the case of organised employees, they can be discharged only for ‘Just Causes’, again they can appeal against such actions. It should be used sparingly in exceptional cases. The punishment should not be out of proportion to the offence.

Dismissal is the termination of the services of an employee as a punitive measure for some misconduct. Discharge also means termination of the services of an employee but not necessarily as a punishment. A discharge does not arise from a single irrational act.

Some of the points to be considered while discharging employees are:

a. Clearly list the reasons for discharge.

b. Inform the individual about the reasons for discharge.

c. The manager concerned should be familiar with the rules and regulations.

d. Discharge has to be administered by line managers.

e. There should be a clear cut procedure to settle the case of a discharged employee.

f. There should be provision for review of the discharged employee in the case of organised workforce.

g. If the employee is found to be incompetent, attempts should be made to find another position for him/transfer of the employee could be considered.

In the case of executives and managers in private sector, they can be discharged for reasons such as low sales, low production volumes, poor performance, misbehaviour, financial irregulatories etc.

Form # 5. Retrenchment:

HR function starts with recruitment and selection of employee and ends with separation of employee from the organisation. Retrenchment is the permanent termination of an employee’s service due to economic reasons such as surplus staff, poor demand for products, general economic slow­down etc. Termination of services on disciplinary grounds, illness, winding up of business, etc., does not constitute retrenchment.

As per Industrial Dispute Act (1947), the employer has to give three months’ notice or pay equivalent wages before the actual lay-off date. While retrenching workmen, the employer has to follow the first-in-last-out principle. Further the employer has to get prior approval from Government before retrenching workers.

Form # 6. Termination of Key Managers:

Of all forms of separations, the most difficult job is terminating the services of a person especially if he is holding a senior position in the organisation. This is because the key person may have access to confidential and sensitive documents and may have excellent support within the department/organisation. Therefore the management has to do adequate homework before taking a decision for terminating the services of such key people. Of course, the management may give some time to the person so that he can find out employment opportunities elsewhere.

Some of the points to be considered are given below:

a. Free and frank discussion with the person whose performance is very poor.

b. Identify areas of weaknesses and prepare a plan for overcoming weaknesses.

c. Clearly indicate in writing that the services will be terminated if he does not make sufficient progress as per discussions.

d. Closely monitor the progress shown by the person.

e. Document all the discussions for ready reference.

f. If the person does not show progress, resignation letter should be requested.

g. The affected person will be upset and may become verbally explosive. The manager has to remain cool and calm.

h. The specific reason for terminating the services of the person should not be released to protect the rights of the released person.

Form # 7. Pink Slip:

Pink Slip is an American term that refers to being fired or laid off from one’s job. It refers to American practice of HR department of including a discharge notice in the employee’s salary envelope informing him that his employment has been terminated. Receiving a Pink Slip has become a ‘Metaphor’ for termination of employment in general. It is a slang term and refers to the notice issued for employment termination or fired from the job.

Regarding the origin of the term, it appears to have started during those days when workers were paid in cash and each week’s wages came in an envelope and anyone being laid off would find a notice (reviled pink slip) in the envelope along with final wages. In those days, before trade unions came into the picture, the pink slip arrived unexpectedly.

Many of the pink slips being given out today have little to do with individual performance and it is not the end of the career. There are other employers looking for talent. With negative economic conditions or market down trend, pink slip is not seen as a negative mark against a person. The employers are concerned with knowledge, skills and attitude of the candidates.

Form # 8. Outplacement and Exit Interview:

(a) Outplacement – Under this programme, career guidance is provided to displaced employees to help them in their search for a new job. Guidance is given on resume writing, answering questions during interviews and job searching.

Outplacement activities are handled by third parties who are paid based on the number of outplaced employees. Outplacement services include emotional support and assistance in job research.

(b) Exit Interview – Many companies conduct exit interviews with employees who are leaving the organisation for whatever may the reason. The interview is conducted normally by HR manager to get feedback from employee regarding the job, the boss, company policies and procedures etc.

Some of the questions asked during exit interview are — why do you leave the organisation? What did you like most/least about the job and the company?, What do you think about your boss?, What are your suggestions for development of Human resources in the organisation? Exit interview notes could be analysed and company can take appropriate action wherever required.

Employee Separation – 2 Distinct Phases: Life Aspects and Professional Aspects

A separation has many more dimensions than just cessation of a regular job, and marks the end of a long chapter in one’s life. Obviously, for an individual, this is the time for quick change, especially for those who were at the peak of their careers and power status. For some, it might be a time of confusion, uncertainty, and planning.

One of the choices for leaving the company could be to pursue purely life- related aspects, and have an understanding of moving away from the professional realm or monarchy. Many options exist for a professional after separation. Sometimes, individuals desire to be reengaged in same profession or change tracks.

On the other hand, many prefer to lead a post-retirement life by sacrificing professional competence. Studies in the West show that as many as 70 per cent of people would like to continue in some profes­sion or another to keep them busy. Many even wish to continue their regular jobs.

The course of action depends on the preparations that enable the transition, life attitude, and perceptions. Psychologically, retirement is one phase in the occupation, which leads either to personal satisfaction and self-fulfillment with contribution to organization, society, family and self or job dis­contentment, sense of low self-worth, or negative outlook to organization and society.

This ultimately leads either to positive or negative orientation to life. Either way, it reflects the life cycle and the options possible for post-retirement life. The happiness one experiences or the attitude towards others would largely depend on the outcome when one retires or separates from the career. It is usually seen that positive people go for better options, while the not-so-happy ones either opt out or become frus­trated.

There exist two distinct aspects or phases after separation:

1. The life aspects, and

2. The professional aspects.

1. Life Aspects:

The most common life aspects are the following:

i. Catching up with friends and relatives

ii. Concentrating on one’s health

iii. Devoting more time for oneself and with the family

iv. Developing social networks

v. Engaging in more domestic and social roles

vi. Engaging in spiritual pursuits

vii. Planning for exploring various leisure pursuits

viii. Resting and relaxing.

2. Professional Aspects:

The most common professional aspects are as follows:

i. Accepting that regular salary income might cease

ii. Continuing professional credibility

iii. Developing different equations with the professional networks that has developed earlier

iv. Fading away of status with designation and roles

v. Feeling of frustration of lack of avenues to exhibit one’s talent and knowledge or freedom from job demands

vi. Moving out of operational roles

vii. Moving out of regular professional networks

viii. Sensing that more time is available and activities have declined.

Employee Separation – Factors Responsible for Employee Separation (With the Measures to Reduce Employee Separation)

1. Unavoidable factors such as job with better prospects, illness/accident, retirement, death and marriage in the case of female employees.

2. Avoidable factors include lack of congenial working atmosphere in office/factory, lack of facilities and amenities, ill treatment, no provision for training, rude behaviour of superiors etc. If workers leave due to lack of good working conditions, it is a matter of anxiety and the management should look into the problems and take appropriate action. High employee turnover affects the stability of the organisation and therefore it is not desirable.

It is expensive too due to the following reasons:

a. Cost of recruitment, selection and placement.

b. Training costs.

c. Loss of production due to delay in recruitment.

d. Time taken by employee to settle down in the job and become productive.

e. Overtime charges incurred to complete the work in the absence of regular.

f. Delay in meeting deadlines and delivery schedule.

Measures to Reduce Employee Separation:

1. Scientific recruitment and selection policy

2. Adequate training to meet the job requirements

3. Fair wages and incentives

4. Congenial working conditions

5. Job security and job satisfaction

6. Management should have equal concern for task and employee welfare

7. Merit based promotions

8. Effective industrial relations