Section 79 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 79 sets the conditions for retrenching a worker in a Chapter X establishment: a three-month written notice (or pay for that period) and the prior permission of the appropriate Government. If the Government stays silent for sixty days the permission is deemed granted; a retrenchment without permission is illegal and the notice is treated as never given.
In an industrial establishment to which Chapter X applies, a worker with not less than one year of continuous service cannot be retrenched until (a) three months' written notice with reasons has been given and expired, or wages for the notice period have been paid, and (b) the prior permission of the appropriate Government has been obtained. No order in sixty days means permission is deemed granted. A retrenchment without permission, or after refusal, is illegal from the date of the notice. On a granted or deemed permission, each worker receives fifteen days' average pay for every completed year or any part above six months. Contravention carries a fine of one lakh to ten lakh rupees (s.86(1)).
How section 79 differs from section 70
The general retrenchment rule in section 70 needs one month's notice, compensation and a notice to the Government. Section 79 replaces that, for Chapter X establishments, with a heavier test.
| Point | Section 70 (Chapter IX) | Section 79 (Chapter X) |
|---|---|---|
| Notice to worker | One month in writing, or wages in lieu | Three months in writing with reasons, or wages for the notice period in lieu |
| Government step | Notice served in the prescribed manner | Prior permission on an application |
| Compensation | Fifteen days' average pay per completed year or part above six months, paid at retrenchment | Same scale, payable on a granted or deemed permission (s.79(9)) |
Which establishments are covered is set by section 77: factories, mines and plantations with an average of 300 or more workers (or a higher notified number) in the preceding twelve months. If you are planning a workforce reduction in such a unit, our labour law compliance team can structure the permission application and notices.
Sub-section by sub-section
| Sub-section | Rule |
|---|---|
| 79(1) | No worker with one year or more of continuous service is retrenched until (a) three months' written notice indicating the reasons has been given and has expired, or wages for the notice period are paid in lieu, and (b) prior permission of the appropriate Government has been obtained on an application. |
| 79(2) | The application is made electronically or otherwise in the prescribed manner, stating clearly the reasons; a copy is served simultaneously on the workers concerned. |
| 79(3) | After such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workers and interested persons, the Government may grant or refuse permission by an order with written reasons, having regard to the genuineness and adequacy of the reasons, the interests of the workers and other relevant factors. A copy goes to the employer and the workers. |
| 79(4) | No order communicated in sixty days: permission is deemed granted on expiry of the sixty days. |
| 79(5) | The order is final and binding (subject to (6)) and stays in force for one year. |
| 79(6) | The Government may review on its own motion or on application by the employer or any worker within the prescribed time, or refer the matter to a Tribunal, which passes an award within thirty days of the reference. |
| 79(7) | If no application is made, or permission is refused, the retrenchment is illegal from the date on which the notice of retrenchment was given, and the worker is entitled to all benefits under any law as if no notice had been given. |
| 79(8) | For exceptional circumstances such as an accident in the establishment or the employer's death, the Government may direct that s.79(1) shall not apply for a stated period. |
| 79(9) | Where permission is granted or deemed granted, every worker employed immediately before the date of application receives at retrenchment fifteen days' average pay (or average pay of such days as the appropriate Government notifies) for every completed year of continuous service or any part above six months. |
Points that catch employers out
- Dates matter. The test for who gets compensation under s.79(9) is employment immediately before the date of application, not the date of retrenchment.
- Illegality runs back to the notice. Under s.79(7), a retrenchment without permission is illegal from the date the notice was given, and the worker is treated as if no notice had been given. That reaches further back than s.78(8), where illegality runs from the lay-off.
- Notice pay does not replace permission. Paying wages in lieu of the three-month notice satisfies clause (a); clause (b) still requires permission.
- The last-in-first-out rule and re-employment preference in ss.71 and 72 also apply to Chapter X establishments under s.82; see sections 81 and 82 and sections 71 and 72.
Central Rules, 2026: rules 33 and 34
These rules apply to Central-sphere establishments. Where the State Government is the appropriate Government, the State's own rules apply.
| Rule | Requirement (G.S.R. 342(E), 8 May 2026) |
|---|---|
| 33(1) | Application in Form XIV to the Central Government electronically, stating the reasons; a copy sent to the concerned workers electronically, in person or by speed post. |
| 33(2) | The application is displayed conspicuously on the notice board or electronic board at the main entrance. |
| 34(2) | Review application by the employer or any worker within thirty days of the order; disposed of within two months after a hearing. |
| 34(3) | Review on the Government's own motion: steps within one month of the order, disposal within two months of the decision to review. |
Full text and forms: rules 33 and 34 and Form XIV. Rule 27 (Form XIII notice of retrenchment) is covered in rules 27 to 29.
Re-skilling contribution
Every retrenchment also brings the employer contribution to the worker re-skilling fund: see section 83.
Penalty
Contravening section 79 is punishable under s.86(1) with a fine of one lakh to ten lakh rupees, and under s.86(2) on a second or subsequent offence after conviction with five lakh to twenty lakh rupees, or imprisonment up to six months, or both. See section 86(1) to (6).
Example. A mine with 450 workers wants to retrench 40 workers. It gives each a three-month notice with reasons, files Form XIV electronically, sends a copy to each of the 40 workers and displays it at the entrance. The Government does not communicate an order in sixty days, so permission is deemed granted. Each worker employed immediately before the application date is paid fifteen days' average pay for each completed year of service and any part above six months. A worker with nine years and seven months counts ten years.
For the old-law position, see our posts on prior permission for retrenchment under the old Act and the tax treatment of retrenchment compensation.
Need help with retrenchment permission?
Retrenchment in a Chapter X unit needs reasons that stand up to an enquiry, a worker list, a notice plan and payroll working for compensation. Our labour law compliance team can review your file before filing and keep a dated record of service on workers. Bring the muster roll and proposed retrenchment list.
Key takeaways
- Section 79 needs three months' notice (or pay in lieu) and prior permission for workers with one year of service in Chapter X establishments.
- No Government order in sixty days means deemed permission; an order lasts one year and can be reviewed or referred to a Tribunal.
- Retrenchment without permission is illegal from the notice date, and the notice is treated as never given.
- Compensation of fifteen days' average pay per completed year or part above six months is owed on granted or deemed permission.
- Central-sphere employers apply in Form XIV and display the application at the entrance.
Read next
- Section 78: prohibition of lay-off without permission
- Section 80: prior permission for closing down an undertaking
- Sections 71 and 72: procedure for retrenchment and re-employment
- Retrenchment under Section 25F of the old Act
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.