The Worker Re-skilling Fund

Credited to his account means paid into the worker's own account, not held for him or spent on his behalf.

In case of retrenchment only are the words in section 83(2)(a) that confine the employer's contribution to one event.

Section 83, sub-section by sub-section

83(1): the fund

The appropriate Government shall, by notification, set up a fund to be called the worker re-skilling fund.

The obligation is on the Government and it is mandatory: "shall". The fund is a statutory creation, set up by notification, and it is the appropriate Government that sets it up, so there will be Central and State funds according to which Government is appropriate for the establishment.

83(2): what goes into it

The fund consists of:

• (a) the contribution of the employer of an industrial establishment, of an amount equal to fifteen days' wages last drawn by the worker immediately before the retrenchment, or such other number of days as may be notified by the Central Government, for every retrenched worker, in case of retrenchment only; and
• (b) contributions from such other sources as may be prescribed by the appropriate Government.

Four points, and each is examinable.

The measure is wages last drawn, not average pay. Section 70(b) uses average pay, defined in section 2(d). Section 83 uses wages last drawn immediately before the retrenchment. The two figures will usually differ, and quoting one for the other is a mistake.

It is fifteen days once, not fifteen days per year. Section 70(b) multiplies fifteen days by the years of service. Section 83 does not multiply by anything: it is a single contribution of fifteen days' wages for every retrenched worker.

The figure is movable. The Central Government may notify a different number of days.

And it is triggered by retrenchment only. The words are express: "in case of retrenchment only". So no contribution is due on a lay-off, on a closure, on a dismissal for misconduct, or on any of the five terminations that section 2(zh) excludes from retrenchment, including the completion of a fixed term contract.

Clause (b) leaves the fund open to other money, from sources the appropriate Government prescribes, which is how a Government could add to it from its own resources.

83(3): what comes out of it

The fund shall be utilised by crediting fifteen days' wages last drawn by the worker to his account who is retrenched, within forty-five days of such retrenchment, in such manner as may be prescribed.

Three features, and the first is the important one.

The money goes to the worker's own account. It is not spent on courses chosen by somebody else, not paid to a training institute, and not held on his behalf. It is credited to his account, so he decides what to do with it.

The period is forty-five days from the retrenchment. That is short, and deliberately so: money for retraining is worth most immediately after the job ends.

And the sum out matches the sum in. Fifteen days' wages last drawn goes in under sub-section (2)(a) and fifteen days' wages last drawn comes out under sub-section (3). The fund is a conduit rather than a pool that grows.

The two fifteen-day payments compared

This is the comparison a student must be able to make, because the coincidence of the figure invites confusion.

Work an illustration, because the difference in size is the point. A worker with eight years' service, average pay and last-drawn wages both twenty thousand rupees a month, so roughly six hundred and sixty-seven rupees a day.

Under section 70(b): eight completed years, fifteen days each, so one hundred and twenty days' average pay, roughly eighty thousand rupees.

Under section 83: fifteen days' wages last drawn, once, roughly ten thousand rupees.

So the re-skilling contribution is a small addition to the compensation, not a substitute for it. Its value is that it arrives quickly, in the worker's own hands, and for a stated purpose.

A worked example

The facts. A packaging plant in Wada, outside Chapter X, retrenches ten workers when it installs automated sealing machines. Meera has served four years and eight months; her last-drawn wages are eighteen thousand rupees a month.

What must the employer do under Chapter IX? All three conditions in section 70: one month's notice in writing indicating the reasons or wages in lieu; compensation at the time of retrenchment of fifteen days' average pay for every completed year and any part in excess of six months, which for Meera is five units, seventy-five days' average pay; and notice to the appropriate Government.

What must he do under Chapter XI? Contribute to the worker re-skilling fund an amount equal to fifteen days' wages last drawn by Meera immediately before the retrenchment, section 83(2)(a). That is one contribution for her, not one for each year.

When does Meera get it? The fund must be utilised by crediting fifteen days' wages last drawn to her account within forty-five days of the retrenchment, section 83(3).

Change the facts: the plant lays Meera off for two months instead of retrenching her. No contribution is due. Section 83(2)(a) applies in case of retrenchment only. She has her lay-off compensation under section 67 instead.

Change again: Meera's fixed term contract simply expires and is not renewed. No contribution. By section 2(zh)(iv) the completion of the tenure of fixed term employment is not retrenchment, so section 83's trigger is not met, and no retrenchment compensation is payable under section 70 either. What she has is what section 2(o) gave her while the contract ran: parity of hours, wages, allowances and benefits with a permanent worker doing the same or similar work, proportionate statutory benefits, and gratuity after one year.

Change again: the plant closes down entirely. Section 75 gives Meera notice and compensation as if retrenched, but section 83(2)(a)'s words are "in case of retrenchment only", and a closure is a distinct event under section 2(h). The deeming in section 75(1) is expressly for the purpose of notice and compensation in accordance with section 70, not for Chapter XI.

Finally, a Chapter X plant. The employer of a plant employing 480 workers retrenches with the prior permission of the appropriate Government under section 79. Section 83 applies in the same way: the trigger is retrenchment, and Chapter XI draws no distinction between Chapter IX and Chapter X establishments.

What this does NOT mean

It does not mean fifteen days per year. Section 83 is a single contribution per retrenched worker. The multiplication by years of service belongs to section 70(b).

It does not mean average pay. Section 83 uses wages last drawn immediately before the retrenchment.

It does not mean the money is spent on training for him. It is credited to his account, and what he does with it is his own affair.

It does not apply to a lay-off or a closure. The words are "in case of retrenchment only".

It does not replace retrenchment compensation. Both are payable on a retrenchment, and section 70(b) is much the larger sum.

It does not depend on the size of the establishment. Chapter XI has no threshold, unlike Chapter X.

Limits, criticism and amendments

The amount is small and it is the first criticism made. Fifteen days' wages will not pay for training of any length, and the section fixes no relationship between the sum and the cost of acquiring a new skill. The power in section 83(2)(a) to notify a different number of days is the only route to a larger figure.

The section says nothing about how the money is to be used. It is credited to the worker's account and the Code imposes no obligation to spend it on training, no approved list of courses and no verification. That is defensible as respecting the worker's own judgment, and it also means the provision may in practice operate as a small additional cash payment rather than as re-skilling.

"In case of retrenchment only" leaves out the workers who most need it. A worker whose establishment closes, or whose fixed term contract simply ends, is out of work for reasons just as structural as the retrenched worker's, and gets nothing under this Chapter.

And the fund's machinery is almost entirely left to rules. The manner of contribution, the manner of crediting and the other sources of money are all prescribed rather than stated, so the provision's practical shape depends on delegated legislation.

Against that, the design has two real virtues. The money goes to the worker, not to an institution, which avoids the familiar failure of training schemes that exist mainly for their providers. And the forty-five-day limit means it arrives while it can still be used.

Quick revision

• Section 83(1): the appropriate Government shall, by notification, set up the worker re-skilling fund.
• 83(2)(a): the employer contributes an amount equal to fifteen days' wages last drawn by the worker immediately before the retrenchment, or such other number of days as the Central Government notifies, for every retrenched worker, in case of retrenchment only. 83(2)(b): other prescribed sources.
• 83(3): the fund is utilised by crediting fifteen days' wages last drawn to the retrenched worker's account within forty-five days of the retrenchment, in the prescribed manner.
• Not the same as section 70(b): that is fifteen days' average pay per completed year and any part over six months, paid to the worker at the time of retrenchment. Section 83 is fifteen days' wages last drawn, once, into a fund.
• Entirely new law: the Industrial Disputes Act 1947 had no equivalent.
• No threshold: Chapter XI applies whether or not the establishment is within Chapter X.

Test yourself

1. What is the worker re-skilling fund and how is it funded? Section 83(1) requires the appropriate Government to set up, by notification, a fund called the worker re-skilling fund. Under section 83(2) it consists of the contribution of the employer of an industrial establishment, of an amount equal to fifteen days' wages last drawn by the worker immediately before the retrenchment, or such other number of days as the Central Government may notify, for every retrenched worker, in case of retrenchment only; together with contributions from such other sources as the appropriate Government may prescribe.

2. How and when is the fund paid out? Under section 83(3) the fund is to be utilised by crediting fifteen days' wages last drawn by the worker to his account, within forty-five days of the retrenchment, in such manner as may be prescribed. The money goes to the worker's own account rather than to a training provider, and the Code does not require him to spend it in any particular way.

3. Distinguish the payment under section 83 from retrenchment compensation under section 70(b). Section 70(b) is compensation for the loss of the job: fifteen days' average pay for every completed year of continuous service and any part in excess of six months, paid by the employer directly to the worker at the time of retrenchment. Section 83 is money for re-skilling: a single contribution of fifteen days' wages last drawn, not multiplied by years of service, paid by the employer into the fund, and credited to the worker's account within forty-five days. The measures differ, the multiplication differs, the payee differs and the purpose differs.

4. Is a contribution due when a worker is laid off, or when an establishment closes? No. Section 83(2)(a) is expressly confined to a contribution "for every retrenched worker in case of retrenchment only". A lay-off is a distinct event under section 2(t) carrying compensation under section 67, and a closure is a distinct event under section 2(h) carrying notice and compensation under section 75 as if the worker had been retrenched, that deeming being for the purposes of section 70 and not of Chapter XI.

5. Why was Chapter XI introduced? Because retrenchment compensation assumes that another job of the same kind exists for the worker to find, and where a job has been ended by automation or restructuring that assumption fails. Section 70(b) compensates the worker for what he has lost; section 83 gives him a sum, in his own hands and quickly, for what he needs next. It is also the counterweight the Code offers for the changes that make shedding labour easier than under the repealed Act, in particular the raising of the Chapter X threshold from one hundred workers to three hundred and the exclusion of the completion of fixed term employment from retrenchment.

6. Comment critically on section 83. Its virtues are that the money is credited to the worker's own account rather than paid to a training provider, which avoids the usual failure of schemes that exist mainly for their providers, and that the forty-five-day limit ensures it arrives while it is still useful. Its weaknesses are that fifteen days' wages bears no stated relationship to the cost of acquiring a new skill; that the Code imposes no obligation to spend the money on training and provides no verification, so it may operate as a small cash payment; that the trigger is retrenchment only, leaving out workers whose establishment closes or whose fixed term contract simply ends; and that the manner of contribution, the manner of crediting and the other sources of funding are all left to rules, so the provision's practical shape depends on delegated legislation.