Lay-Off: Meaning, Rules & Compensation in India
Updated 5 min read
Definition
A lay-off is when an employer cannot give a worker work, while that worker’s name stays on the muster roll, the daily attendance register. The job has not ended.
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What Is Lay-Off?
In the news the word means job cuts, but Indian law uses it for something quite different.
A lay-off is when an employer cannot give a worker work, while that worker’s name stays on the muster roll, the daily attendance register. The job has not ended. Section 2(t) of the Industrial Relations Code, 2020 defines it, and section 67 puts the pay at half of basic wages plus dearness allowance (DA).
The cause has to be one the Code recognises:
- a shortage of coal, power or raw materials
- stocks piling up, or machinery breaking down
- a natural calamity, or any other connected reason
Which Employers Must Pay
Most employers who think this rule reaches them are reading the wrong section. Section 65 of the Industrial Relations Code fences off sections 67 to 69 before section 67 says a word about money.
The Code says worker, not employee, and the word carries a limit. Section 2(zr) leaves out anyone employed mainly in a managerial or administrative job, and a supervisor paid above ₹18,000 a month, or a higher figure the government notifies.
| Point | Rule |
|---|---|
| Where | Factories, mines and plantations only |
| Size | 50 or more workers on average, under 300 |
| Who | One year of service, not a badli (stand-in) or casual worker |
| Rate | 50% of basic wages and DA |
An office, a shop or a hotel sits outside sections 67 to 69, whatever its headcount. So does a seasonal unit, such as a sugar plantation that works only part of the year. A textile mill with 210 workers sits inside them.
At 300 workers or more a different chapter takes over. Section 78 asks the employer to get the appropriate government’s prior permission first. The exceptions are a shortage of power and a natural calamity, plus fire, flood, inflammable gas or an explosion in a mine.
All of this turns on whose name the muster roll carries. Get the register right before working out a rupee.
Lay-Off vs Retrenchment
| Aspect | Lay-off | Retrenchment |
|---|---|---|
| Job | Continues | Ends |
| Rolls | Name stays | Name comes off |
| Money | 50% of basic and DA | 15 days’ pay per year served |
| Notice | None required | One month, in writing |
Retrenchment also needs notice served on the government under section 70. Our severance pay calculator works out that side of it. A lay-off needs none of it, because nobody is leaving.
Lay-Off Example
A press-parts factory in Lucknow (an example) employs 180 workers. Its imported steel coil misses the ship in March 2026, and the line stands still from the 8th to the 18th.
| Item | Amount |
|---|---|
| Basic | ₹842 a day |
| DA | ₹118 a day |
| Rate | 50% |
| Days paid | 10 |
| Total | ₹4,800 |
Note: this is an invented example for illustration only. The factory, the dates and the wage figures are made up.
Eleven days passed and ten were paid, because section 67 leaves out the weekly holidays that fall inside the period.
A fitter who joined ten months ago may still qualify. Section 66 counts 240 days of actual work in the previous twelve months as a full year, and 190 days for anyone working below ground in a mine.
Why the 45-Day Mark Matters
Most summaries say the money stops after 45 days. The section does not say that.
The proviso to section 67 lets the money stop after the first 45 days in any twelve months. That takes an agreement between the worker and the employer. With no such agreement, payment runs on.
Past those 45 days the employer may instead retrench the worker under section 70. If that happens, the second proviso lets the lay-off money already paid over the previous twelve months be set off against the retrenchment compensation. The safer habit is to settle which road you are on before day 46, not after.
The Records a Lay-Off Runs On
Three records decide the sum: who was on the rolls, which days they got no work, and what their basic wages and DA come to.
Attendo (formerly Petpooja Payroll) is a complete workforce management system for every kind of business. It keeps attendance, registers and pay in one place, so none of it has to be rebuilt from paper.
To see what that looks like against your own records, take a look at Attendo. It will not tell you whether a lay-off is lawful, and no software should.