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COVID-19 Impact: Companies Now Want To Enable An Early And Flexible Exit

It is likely that from H2 FY21, most of the new exit clauses would come into place across India Inc

Jun 19, 2020 / 04:08 PM IST

With the coronavirus outbreak and uncertainty around job roles, companies in India are looking to ease the exit process and help those seeking alternate employment.

Industry sources told Moneycontrol that the slew of measures include reduction or waiver in the notice period, removal of gardening leave clauses and bringing in outplacement for those unable to find jobs.

As a cost optimisation measure, India Inc has resorted to pay cuts and layoffs across the board. However, the exit process continues to remain lengthy and complicated, making it tougher for employees to seek other job roles.

Ankita Pai, a Delhi-based employment consultant, said both mid-sized and large companies are looking to restructure the employment contracts. “A large manufacturing firm is now planning to reduce the no-compete clause period to six months so that the laid-off staff will find it easier to join a rival,” she added.


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Similarly, companies are having a re-look and doing away with the ‘gardening leave’ clause so that an employee is able to resign quickly from an organisation and also find alternative jobs.

A 'gardening leave' is a period that an employee serves in a company, but is not required to come to the workplace. The employee is still contractually part of the organisation and cannot join anywhere else. This is a sort of a paid leave to ensure that the employee does not have access to any sensitive information that could be potentially used by competitors.

Though it is advisable to incorporate gardening leave clauses in the employment contract itself, in some instances employers may insist on such covenants even if the employment agreements are silent on such aspect.

HR sources said the retail and banking and financial services (BFSI) sector have been the most active over the past four to five weeks in engaging with external consultants to restructure exit clauses.

Intended to benefit the organisation from unfair competition and enable them to find replacement talent, these norms have often prevented exiting employees from finding suitable alternatives.

Kolkata-based Sahil Punjwani who resigned in April from his financial advisor role at a large BFSI firm due to the ongoing COVID-19 situation is unable to find another job due to his contract.

“As per my skillsets, I was purely getting jobs at rival companies. But my former employer had a 12-month no compete clause, making it tough for me to find jobs in the sector. Now, I am hearing from former colleagues that the company is reconsidering this decision,” he added.

To ensure that trade secrets and important business decisions are not leaked to rivals in the sector, companies have a no-compete clause in employment contracts, wherein those exiting the firm cannot join a rival in the industry for at least one-to-two years.

About 10 million salaried professionals are estimated to have lost their jobs in India since March 25 due to the coronavirus pandemic. The tougher exit clauses would have made it worse.

Especially in financial services, companies have been asking employees to resign to ensure that the relieving letter doesn’t show that he/she was fired. But this automatically means that a minimum notice period has to be served.

A source told Moneycontrol that banks and non-banking financial companies (NBFCs) are tweaking the norms to enable early exits. Outplacement services are being offered for the next two to three months.

Outplacement refers to hand-holding the exiting employer by providing alternate employment options through external consultants. While this was being done even prior to the COVID-19 lockdown, the number of companies joining the list has increased.

“The endeavour is to enable the exiting employees to quickly find an alternative. Because at a time when there is an over-supply of talent in the market, even a one-week delay in relieving someone of their roles could make it challenging for him/her to find another job,” said Palani Mani, founder of BCE HR Search.

It is likely that from H2 FY21, most of the new exit clauses would come into place across India Inc.
M Saraswathy
first published: Jun 19, 2020 04:08 pm

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