Laid Off by an IT Company in Hyderabad: Your Rights and What to Check

This guide is for software, IT and IT-enabled services employees in Hyderabad and Telangana who have been laid off, asked to resign, put on a performance improvement plan, or offered a severance package. It explains which law now applies after the Labour Codes came into force, what the law says about notice, retrenchment compensation, final pay and gratuity, what the Telangana Shops and Establishments Act says, what to look for before signing a settlement or a non-compete clause, what the new Provident Fund scheme says about withdrawal, and where to raise a complaint in Telangana.

Which law applies now · Are you a “worker”? · Notice and retrenchment compensation · Final pay within two working days · Gratuity · The Telangana Shops Act · Asked to resign, settlements and non-competes · Provident Fund · Tax · Where to complain · A checklist

Which law applies now

The Industrial Relations Code, 2020, the Code on Wages, 2019 and the Code on Social Security, 2020 came into force on 21 November 2025, in whole or in large part. The Central Government appointed that date for the whole of the Industrial Relations Code, and for most of the other two Codes.

• Industrial Disputes Act: the Industrial Relations Code is described by the Government as having been prepared “after amalgamating, simplifying and rationalizing” the Industrial Disputes Act, 1947 and two other Acts. A Central Government notification of 2 February 2026 states that the Industrial Disputes Act “stood repealed” from 21 November 2025, and the Industrial Relations Code (Amendment) Act, 2026, passed by Parliament and deemed in force from that date, lists it among the enactments repealed from the date the Code came into force.
• Payment of Gratuity Act: the Code on Social Security repeals the Payment of Gratuity Act, 1972, and that part of the Code is in force from 21 November 2025. Gratuity is now under sections 53 to 58 of the Code.
• Existing courts continue: the Central Government has directed that the existing Labour Courts and Industrial Tribunals “shall continue to adjudicate the existing as well as new cases” until tribunals are constituted under the new Code.
• State rules: on 28 October 2026 the Telangana Labour Department’s website still showed the four State rules under the Codes as drafts, with comments invited until 15 June 2026. Matters the Codes leave to be “prescribed” by rules, such as forms and the officers who deal with them, depend on those rules.

Older articles may refer to section 25F or section 2(s) of the Industrial Disputes Act; the provisions below are the ones in the Codes.

Are you a “worker” under the Industrial Relations Code?

The retrenchment rules in the Industrial Relations Code apply to a “worker”. The Code defines a worker as a person “employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward”, but not a person who “is employed mainly in a managerial or administrative capacity”, or who “is employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time” (section 2(zr)).

• Duties, not title: under the old Act, the Supreme Court said in Lenin Kumar Ray v Express Publications (21 October 2024) that “the determinative factor for “workman” covered under section 2(s) of the I.D. Act, is the principal duties and functions performed by an employee in the establishment and not merely the designation of his post”, and that “the onus of proving the nature of employment rests on the person claiming to be a “workman””.
• Within the listed categories: a five-judge bench said in H.R. Adyanthaya v Sandoz (1994) that a person “must be employed to do the work of any of the categories, viz., manual, unskilled, skilled, technical, operational, clerical or supervisory. It is not enough that he is not covered by either of the four exceptions to the definition.” The new definition uses the same list of categories.
• Wider definitions elsewhere: for final wages, the Code on Wages defines “employee” to include “supervisory, managerial, administrative, technical or clerical work” (section 2(k)), and for gratuity the Code on Social Security uses a similarly wide definition (section 2(26)). So the final-pay and gratuity rules are not limited to “workers”.

Whether a particular engineer, team lead or manager is a “worker” depends on what the person mainly does, and is worth taking advice on before relying on the retrenchment provisions.

Notice and retrenchment compensation

“Retrenchment” means “the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action”, but does not include voluntary retirement, superannuation, non-renewal or termination of a contract under a stipulation in it, “completion of tenure of fixed term employment”, or termination on the ground of continued ill-health (section 2(zh)).

A worker “who has been in continuous service for not less than one year under an employer shall be retrenched by that employer” only after three conditions are met (section 70):

• Notice: “one month’s notice in writing indicating the reasons for retrenchment” has been given and has expired, or the worker has been paid wages for the notice period instead.
• Compensation: the worker has been paid, at the time of retrenchment, compensation “equivalent to fifteen days’ average pay, or average pay of such days as may be notified by the appropriate Government, for every completed year of continuous service or any part thereof in excess of six months”.
• Notice to Government: a notice in the manner prescribed has been served on the appropriate Government or the authority it specifies.

• Continuous service: a worker who has actually worked for the employer for not less than 240 days in the twelve months before the relevant date is treated as having a year’s continuous service (section 66, Explanation 1).
• Last come, first go: in the absence of an agreement, “the employer shall ordinarily retrench the worker who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other worker” (section 71).
• Re-employment preference: if the employer proposes to employ people within one year of the retrenchment, retrenched workers who are citizens of India are to be given an opportunity to offer themselves and “shall have preference over other persons” (section 72).
• Re-skilling fund: the Code provides for a “worker re-skilling fund” to which the employer contributes fifteen days’ wages last drawn for every retrenched worker, to be credited to the worker within forty-five days “in such manner as may be prescribed” (section 83). The Government has described it as “in addition to retrenchment compensation”.

Large establishments: the stricter rules requiring three months’ notice and the Government’s prior permission (sections 77 and 79) apply, on the Code’s words, to factories, mines and plantations employing 300 or more workers. The separate “lay-off” provisions (sections 67 to 69, read with section 65) are also written for factories, mines and plantations. “Lay-off” in the Code is a defined term and is not the everyday word for being let go.

Final pay within two working days

Where an employee has been “removed or dismissed from service” or “retrenched or has resigned from service, or became unemployed due to closure of the establishment, the wages payable to him shall be paid within two working days of his removal, dismissal, retrenchment or, as the case may be, his resignation” (Code on Wages, section 17(2)). The appropriate Government may provide a different time limit (section 17(3)).

A claim under the Code on Wages may be made to an authority appointed by the Government by the employee, a registered trade union or the Inspector-cum-Facilitator, “within a period of three years from the date on which claims … arises”. The authority may also order compensation “which may extend to ten times of the claim determined”, and is to try to decide within three months (section 45).

Gratuity

• Five years: “Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years”, including “on his retirement or resignation” and “on termination of his contract period under fixed term employment” (Code on Social Security, section 53(1)). Five years is not needed where the employment ends due to death, disablement or “expiration of fixed term employment”.
• Amount: “fifteen days’ wages” for “every completed year of service or part thereof in excess of six months”, based on the wages last drawn (section 53(2)); for a monthly-paid employee, fifteen days’ wages is the monthly rate divided by twenty-six and multiplied by fifteen.
• Fixed-term employees: gratuity for a fixed-term employee is paid “on pro rata basis” (section 53(2)). The Government’s statement of 21 November 2025 says “Fixed-term employees become eligible for gratuity after one year of continuous service (earlier five years).”
• Ceiling and better terms: the amount “shall not exceed such amount as may be notified by the Central Government” (section 53(3)), and the section does not affect “the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer” (section 53(5)).
• Payment: “The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable”, failing which simple interest is payable (section 56(3) and (4)).

The Telangana Shops and Establishments Act

Section 47 of the Telangana Shops and Establishments Act, 1988 says: “No employer shall, without a reasonable cause terminate the service of an employee who has been in his employment continuously for a period of not less than six months without giving such employee atleast one month’s notice in writing or wages in lieu thereof”, and, for an employee with at least one year’s continuous employment, “a service compensation amounting to fifteen days average wages for each year of continuous employment”. Every termination must be in writing, with a copy sent to the Inspector within three days.

• Appeal: “Any employee whose services have been terminated may appeal to the authority concerned within such time and in such manner as may be prescribed”, and the authority may dismiss the appeal, direct reinstatement with or without wages, or direct compensation without reinstatement (section 48).
• The IT exemption: a combined-State order of 2013 had exempted IT and IT-enabled services establishments from section 47(1) to (4) among other sections. Telangana’s G.O.Ms.No.25 of 25 July 2019 exempted IT and ITES establishments only from sections 15, 16, 21, 23 and 31, on conditions, and a 2024 order (G.O.Ms.No.5 of 7 June 2024) renewed that exemption for four years from 30 May 2024. Section 47 is not in the list in either order.
• Senior managers: section 73(1)(a) of the Act excludes “employees in any establishment in a position of management and having control over the affairs of the establishment” whose average monthly wages exceed the amount stated.

How section 47 of the Shops Act and section 70 of the Industrial Relations Code apply together to a particular IT employee is a question to take advice on; the texts read for this guide do not settle it.

Asked to resign, settlements and non-competes

• Resignation and retrenchment are treated differently: retrenchment is a “termination by the employer” and does not include voluntary retirement (section 2(zh)). Retrenchment compensation under section 70 is tied to retrenchment. Final wages are due within two working days in either case (Code on Wages, section 17(2)), and gratuity after five years’ service is payable on resignation as well (Code on Social Security, section 53(1)). If you are asked to resign, keep the written record of who asked and what was said.
• Settlement letters: the Industrial Relations Code defines a “settlement” to include a written agreement between employer and worker made outside conciliation only “where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorised in this behalf by the appropriate Government and to the conciliation officer” (section 2(zi)). Read any release or “full and final settlement” letter carefully, and take advice before signing if you are unsure what you are giving up.
• Non-compete clauses: section 27 of the Indian Contract Act, 1872 says: “Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind is to that extent void.” In Niranjan Shankar Golikari (1967) the Supreme Court distinguished restrictions during employment from those after it, saying that negative covenants “operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade”. In Percept D’Mark v Zaheer Khan (2006), a case about a sports promotion agreement, it said that in construing section 27 “neither the test of reasonableness nor the principle of restraint being partial is applicable, unless it falls within express exception engrafted in Section 27”. Whether a particular clause can be enforced depends on its terms and facts.

Provident Fund

The Employees’ Provident Funds Scheme, 1952 was superseded by the Employees’ Provident Funds Scheme, 2026, notified on 29 June 2026 under the Code on Social Security.

• Full withdrawal on retrenchment: “A member may withdraw the full amount standing to his credit in the Fund” on, among other things, “termination of service in the case of mass or individual retrenchment” and “termination of service under a voluntary scheme of retirement framed by the employer and the employee under a mutual agreement” (paragraph 49(1)(iv) and (v)). A separate clause, for a member “discharged and is given retrenchment compensation”, says actual payment is made only after a continuous period of not less than two months (paragraph 49(1)(vi)(c)).
• Others leaving service: the Commissioner may permit full withdrawal “on ceasing to be an employee”, but not unless the member has not been employed in an establishment covered by the Code “for a continuous period of not less than twelve months immediately preceding the date of application” (paragraph 49(2)).
• Partial withdrawal: partial withdrawals are subject to keeping a “minimum balance” of twenty-five per cent of total contributions and interest in the account (paragraph 46(1)).

The Scheme’s withdrawal rules differ by the reason for leaving, so check the reason your employer records for your exit.

Tax

The Income-tax Act, 2025 came into force on 1 April 2026. Section 19 of that Act allows deductions from salary income, within limits, for “Compensation received by a workman at the time of his retrenchment”, for gratuity, and for leave encashment received “at the time of his retirement, whether on superannuation or otherwise”. Some of these limits are set by Government notification. Because the figures depend on notifications and on how the payment is described in your settlement, check them with a tax professional before filing.

Where to complain in Telangana

• Labour Department: the Commissioner of Labour, Telangana is at the department’s office at RTC X Roads, Hyderabad. The department’s contact page lists the jurisdictions and contact numbers of its Joint, Deputy and Assistant Commissioners of Labour and asks people “to contact the right officers to resolve of their issues”. The website also has an online complaint registration page with a category for “Employee Grievances”.
• Individual dispute: a dispute about the “discharge, dismissal, retrenchment or termination” of an individual worker is treated as an industrial dispute even if no other worker or union is a party (section 4(9)). The worker may apply directly to the Tribunal “after the expiry of forty-five days from the date he has made the application to the conciliation officer”, and the application must be made “before the expiry of two years from the date of discharge, dismissal, retrenchment or otherwise termination of service” (section 4(10) and (11)).
• Inside the company: “Every industrial establishment employing twenty or more workers shall have one or more Grievance Redressal Committees” (section 4(1)).
• Wage claims: claims for unpaid wages under the Code on Wages go to the authority appointed under section 45, within three years.

A checklist when you are let go

• Ask for the termination or retrenchment in writing, with the reason and the last working day.
• Keep your appointment letter, revisions, payslips, the policy on notice and severance, and any performance plan.
• Check the notice period or notice pay, compensation, final wages, leave encashment, bonus or variable pay, and gratuity in the settlement statement.
• Note the date: final wages are due within two working days, and gratuity within thirty days of becoming payable.
• Read any release, settlement or non-compete clause before signing.
• Check the reason for leaving recorded with EPFO.
• Collect your relieving letter, experience letter and tax documents.

Related guides: legal opinion, consumer complaints and civil cases.

For a discussion about a layoff, retrenchment or severance settlement with Musab Hashmi & Associates, call +91 89771 24916 or send an enquiry. Do not include identity numbers, salary account details or copies of documents in the first message.

General legal information, not legal advice. Checked on 28 October 2026 against the Industrial Relations Code, 2020, the Code on Wages, 2019 and the Code on Social Security, 2020 (Gazette texts), the Central Government’s commencement notifications of 21 November 2025, copies of the Central Government’s notifications of 8 December 2025 and 2 February 2026 and of the Industrial Relations Code (Amendment) Act, 2026, the PIB backgrounder of 21 November 2025 on the labour reforms, the Employees’ Provident Funds Scheme, 2026 (Gazette of 29 June 2026), the Income-tax Act, 2025 (Gazette text), the Telangana Shops and Establishments Act, 1988 (India Code text), Telangana G.O.Ms.No.25 of 2019 and a copy of G.O.Ms.No.5 of 2024, the Telangana Labour Department website, the Supreme Court’s judgment in Lenin Kumar Ray v Express Publications (21 October 2024, official copy), and Supreme Court Reports texts of H.R. Adyanthaya v Sandoz (1994), Niranjan Shankar Golikari (1967) and Percept D’Mark v Zaheer Khan (2006).