Maruti to formalise severance policy after settling with strike spearheads

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Just days after employee union leader Sonu Gujjar and 29 of his lieutenants spearheading the strike at Maruti Suzuki’s Manesar plant resigned with substantial “full and final settlements”, the company is considering a severance policy for workers facing dismissal or suspension.

The union leaders, who were under suspension and were to face an inquiry committee where they could be dismissed, were reportedly paid a little over Rs 16 lakh each as their final settlement — much more attractive than a normal severance package or voluntary retirement scheme (VRS).

When Maruti had offered an attractive VRS after a strike in 2000, the amount involved was Rs 12 lakh. Based on the severance rules in India — 15 days’ pay for every year of service — the Manesar workers would have got only Rs 50,000 (apart from gratuity, PF, etc). The Manesar workers get an average monthly salary of Rs 20,000 and have not worked for more than five years, on average.

Maruti chairman R C Bhargava says, “Yes, I think we need to have a severance package policy. After all, it costs both sides a lot of money and time to fight court cases against dismissals. A mutually agreed settlement is a much better option. It is better for the company and its employees.”

The company does not have a severance policy but had used a liberal VRS in 2000, which became a reference point for some of the key union leaders during the recent strike. In 2000, the scheme helped the company flush out nearly 2,500 out of 4,500 involved in the strike.

The severance package could well be the incentive that gets disgruntled workers out. Bhargava says severance packages are common at the management level across the world. For instance, many MNCs which had Indian operations and decided to wind down operations during the financial crisis gave severance packages to employees they wanted to dismiss. “There is no reason why there cannot be a severance package for workers,” says Bhargava.

A Maruti spokesperson declined to comment on how big the “final settlement” was, except for saying the workers in question had resigned from the company. The spokesperson refused to talk specifics.

Workers who have taken the settlement amount say they have received money through two cheques: one for Rs 12 lakh and the other for Rs 4 lakh.

Naveen, a worker who was under suspension and took the offer, said union leaders Sonu Gujjar and Shiv Kumar resigned on October 19 even before the settlement was reached. After that, others who were suspended put in their papers fearing they would be dismissed from service once the inquiry was over. “We had no choice but to resign and accept the offer as we were sure the inquiry would not be in our favour” said Naveen.

With all 11 office-bearers of the proposed Manesar union leaving the company, workers said they were going to nominate fresh union representatives on Sunday.