Published: 15 October 2026
When planning employee retrenchment, employers generally focus on notice pay, retrenchment compensation and the settlement of outstanding dues. However, another important compliance requirement deserves attention: the Worker Re-skilling Fund contribution under the Industrial Relations Code, 2020.
For HR professionals, employers and finance teams, assessing this obligation before finalising a retrenchment decision can help prevent compliance gaps and unexpected financial liabilities.
1. Is the Worker Re-skilling Fund Contribution Applicable to Every Establishment?
Not necessarily. Section 83 of the Industrial Relations Code, 2020, addresses the obligation of an employer of an industrial establishment to contribute to the Worker Re-skilling Fund when a worker is retrenched.
Before determining applicability, employers should assess three key factors:
Nature of the establishment: Does the organisation fall within the statutory definition of an industrial establishment?
Employment category: Does the individual qualify as a “worker” under the Code?
Reason for separation: Does the proposed termination legally constitute retrenchment?
The requirement is not necessarily restricted to factories. Certain commercial and service establishments may also fall within the relevant definition, depending on their activities and applicable legal provisions.
Registration under a Shops and Establishments Act alone does not determine whether the contribution is applicable.
2. Does an Establishment With Fewer Than 300 Workers Qualify for Exemption?
Having fewer than 300 workers does not, by itself, establish an exemption from the Worker Re-skilling Fund contribution.
The threshold relating to prior government permission under Chapter X serves a different statutory purpose. It should not automatically be treated as the applicability threshold for Section 83.
Accordingly, employers should conduct a separate assessment of their obligations rather than assuming that the absence of a prior-permission requirement also removes the re-skilling fund obligation.
3. Does the Contribution Apply to Every Employee Separation?
No. The employee’s actual duties, employment status and circumstances of separation must be examined.
Individuals primarily employed in managerial or administrative capacities, along with certain supervisory employees, may fall outside the statutory definition of a “worker”.
Similarly, resignation, retirement, dismissal for disciplinary reasons and the expiry of qualifying fixed-term employment contracts should not automatically be classified as retrenchment.
HR teams should evaluate each separation against the applicable statutory definitions before deciding whether a contribution is payable.
4. How Is the Worker Re-skilling Fund Contribution Calculated?
Under Section 83, the contribution is specified as an amount equivalent to 15 days’ wages last drawn by the worker immediately before retrenchment, or such other number of days as may be notified by the Central Government.
This contribution is separate from the retrenchment compensation payable to an eligible worker.
Importantly, the contribution should not be confused with 15 days’ wages for every completed year of service.
Illustrative example:
If the applicable contribution works out to ₹15,000 per worker and four eligible workers are retrenched, the total additional contribution would be:
Contribution per worker: ₹15,000
Number of workers retrenched: 4
Total contribution: ₹60,000
The actual amount must be calculated using the applicable statutory requirements and the relevant wage details.
5. What Is the Deadline for Depositing the Contribution?
The applicable payment deadline and procedure should be verified against the rules governing the establishment.
For establishments falling under Central Government jurisdiction, the supplied draft refers to Rule 37 of the Industrial Relations (Central) Rules, 2026, which requires the contribution to be transferred to the designated fund within 10 days of retrenchment, along with the prescribed worker particulars.
Employers should also distinguish the employer’s deposit deadline from the separate 45-day period referred to for crediting the amount to the worker.
For establishments under State Government jurisdiction, HR and compliance teams should check the applicable state rules, notifications and fund arrangements before processing the payment.
6. Retrenchment Compliance Checklist for HR and Finance Teams
Before issuing a retrenchment notice or finalising an employee settlement, employers should:
Assess whether the establishment falls within the relevant statutory coverage.
Verify whether the affected individual qualifies as a worker.
Determine whether the proposed separation constitutes retrenchment.
Calculate notice pay, retrenchment compensation and other applicable dues separately.
Assess and calculate the Worker Re-skilling Fund contribution, wherever applicable.
Confirm the prescribed payment method, documentation and deadline.
Maintain payment acknowledgements and supporting records with the retrenchment documentation.
Conclusion
The Worker Re-skilling Fund contribution is an important consideration in retrenchment planning under the Industrial Relations Code, 2020. Employers should not assume that the contribution is inapplicable merely because their establishment has fewer than 300 workers or because an employee’s departure is described as a termination.
A documented applicability assessment and timely compliance review can help HR and finance teams manage retrenchment more systematically and reduce the risk of overlooking additional statutory obligations.
Need assistance with industrial relations compliance, retrenchment documentation or labour law advisory?
M. S. Sankhla & Co.
Website: Sankhla Consultants