Recent reports suggest that the Government of India is favourably inclined to change policy and enable establishments employing less than 1,000 workers to lay-off employees and undertake retrenchments or closures without prior permission. Corporate lay-offs in the U.S. indicate an ever-increasing trend and do not make a comforting reading. The year 2001 for example, saw the highest number of job cuts in the Fortune 500 companies than in any year ever since the survey of lay-offs were launched. Japan, despite its tradition of high employee concern, seems also to be overwhelmed with this new trend at least in the I.T. industry. In India, it appears that pressure is building up to similarly allow this enabling facility to all corporations. Prima facie, it appears as if the business is moving towards a state where manpower in an organisation is kept eternally in the transient state. In the process not only ensuring short-term profits but also as a way out of the long-term social security and welfare benefits obligations towards the employees. The paper examines the impact of lay-off and suggests that while individual impact is important in its own right, the research suggests that the effects of lay-offs go well-beyond the physical, material and psychological state of the individual to the organisation, community and the nation. Literature review suggests that several alternatives to lay-offs are available and examples of implementing these alternative solutions are available around the world. The literature also negates the general view that the unions will not cooperate in finding solutions. Example in industry clearly show that unions and workers are not only willing to cooperate but even show new ways of coping with the business problems to avoid lay-offs. The paper examines various reasons proffered in favour of lay-offs and argues that they are not necessarily a good option for an enterprise faced with business fluctuations. The crux of the issue is as to what is more important: the short-term gains in the stock market or the longer term financial health and stability of an enterprise. The paper suggests that a clear, agreed, rational policy that addresses concerns of management, labour and the general society be developed to address the issue.
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Paper provided by Indian Institute of Management Ahmedabad, Research and Publication Department in its series IIMA Working Papers with number
2002-01-02.