Directorate of distance education master of business administration

Retirement and Other Process of Employees’ Separation
 
Separation, also known as organizational exit is the dissolution 
of employment relationship. It seeks to reduce the size or diversity of 
an organization’s operations. Separation can take many forms namely 
dismissal, resignation, retirement, death and downsizing actions. A 
firm incurs separation costs in the form of severance pay known also as 
separation pay, administration of separation process, rehiring, induction 
and training costs with regard to a new replacement into the vacant 
position. Depending on who initiates the separation, some observers 
tend to classify them as voluntary and involuntary. 
Separation is a decision that the individual and the organization 
should be done away from each other.  Voluntary separations occur 
when an employee decides for personal or professional reasons, to end 
the relationships with the employer.  Such separations may further 
be classified as avoidable and unavoidable. Unavoidable voluntary 
separations occur due to circumstances beyond the control of an 
employee. However, most of voluntary separations are avoidable and 
occur due to staffing mistakes, which can be prevented by investing in HR 
systems. An involuntary separation occurs when management decides to 

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terminate its relationship with its employee/s due to economic necessity 
/ poor match between the employer and employees. 
In general, separation may take any form such as retirement, layoff, 
retrenchment, discharge or dismissal. Employee turnover or attrition is 
a combination of all the forms of separation of an individual from the 
rolls of an organization. Compulsory separation could lead to anxiety in 
the person who leaves and also might lower the morale of the survivors.  
Any form of separation could create a void in the organization that 
needs to be filled up at the earliest. The benefits of employee separations 
include reduced labor costs, replacement of poor performers, increased 
innovation and creation of greater diversity of work force. Scientific 
human resource planning could minimize the need for such separations. 
Retirement is the completion of service period of employees 
on their reaching the age of superannuation. Retirement from active 
employment is intended not only to permit older workers to enjoy 
their twilight years without the everyday pressures of working, but 
also to allow younger and capable employees to reach positions of 
higher authority.  Retirement could be carried out prematurely when 
the organization offers a special retirement package before redesigning 
the workforce. The lump-sum pay serves as an incentive to leave one’s 
employment. Employees accept such retirements in exchange of a liberal 
package, which is called the scheme of Golden Handshake. Managements 
generally prefer to pay hefty amounts and reduce staff strength rather 
than retaining surplus labor and continuing to pay them idle wages. 
The organization should plan for capable successors to take the 
role of people who retire even before their retirement. Most employees 
prefer to postpone retirement until they reach superannuation. Hence 
it is also the responsibility of any employer to plan and provide for the 
future life of the retiring employee. In the present context, when the 
lifespan of average citizen has gone up well above the retirement age, 
retirement is to be put to reconsideration in terms of revision of the age 
of retirement or alternative work styles like job sharing, home working, 
freelancing and part-time employment during post-retirement period. 
Lay off refers to the temporary separation arising out of the failure, 
refusal, inability of an employer to continue to give employment to any 

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group of employees in the organization due to economic or business 
reasons like shortage of fuel, lack of raw material, natural calamities and 
accumulation of excess stocks. Lay offs are caused mainly due to factors 
for which employees cannot be termed as direct and prime causes. Still, 
the organization must help them in dealing with any of the difficulties 
they might experience such as guilt (upon why they have let themselves 
into it), shame (how to face others after this), annoyance or anger (why 
they were chosen) and anxiety (what they would do next). 
Retrenchment is said to be a permanent lay off for reasons other 
than punishment, retirement or termination owing to ill health. In both 
the cases of lay off and recruitment, a certain monetary compensation 
would become payable by the employer as per the statutes of the land. 
Further, clear communication and counseling would be required to 
minimize the negative effects of such measures of downsizing. The 
principle of last in; first out is advocated while prioritizing the people to 
be removed. Retrenchments might also occur due to global competitions, 
changing technologies that reduce the need for workforce, mergers and 
acquisitions and reduction in product demand.  
 
Termination of service by way of dismissal might also be carried 
out as a final disciplinary procedure, after all efforts in salvaging the 
employee have failed. Dismissal can be ordered only when it is duly 
proven through formal procedures that one or more employees have 
engaged in any serious misconduct like theft, violence, sabotage, false 
statement of qualifications at the time of employment, or other actions 
specified in the company’s standing orders. Generous opportunities 
must be given to the employee to know the rules, modify his behavior in 
accordance to rules. He must be given an opportunity to explain his case 
by appearing before an impartial team of enquiry when charged with any 
misconduct.  The management should never forget that any person who 
leaves the firm is going out to represent the organization, either bad-
mouth or praise it. 
 
Termination of this variety is aimed at serving as the strongest 
deterrent for other employees from engaging in punishable activities, 
rather than as a revenge on the people caught in the wrong side of 
rules.  Termination of other employees has the potential in most of 
the employees to bring about a phenomenon called avoidance learning 

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whereby an employee pursues serious efforts to avoid similar situation 
to them.  Termination in one department could have ripple effects in 
other. Terminations beyond a perceptible limit could result in difficulty 
in attracting fresh talents into the organization. Fortunately, such 
disciplinary terminations have alternatives too. 
 
Direct confrontation by supervisors, a day of paid leave to induce 
reformative thinking etc, are aimed at making the erring employee 
introspect about what happened. Some organizations resort to progressive 
discipline involving increasingly higher intensity for punishments for 
every repetition of previous mistake or offence. When a person is found 
to be guilty of one offence, there should not be a carry-forward effect of 
the offence. The supervisor and the others in the organization should 
take care to appreciate if the employee engaged in any laudable activity.  
A clear-cut, written-down policy on termination would help to prevent 
the fire-at-will practices by some managers. 
Discharge also means termination, but not necessarily an act 
of punishment. A discharge does not arise from a single, irrational 
or unacceptable act. There could be a lot of reasons for a decision to 
discharge an employee.  A discharge takes place when the management of 
an organization decides that there is a poor fit between an employee and 
the organization. Discharge might be a result of either poor performance 
of the employee or a failure on his side to change some unacceptable 
behavior that management has tried repeatedly to correct. In the case 
of discharge, the employee would get more termination benefits than 
what would be possible when dismissed.  Outplacement assistance for 
a discharged person by the employer is gaining ground in recent times, 
even as skills become redundant and jobs get outsourced en masse. 
Voluntary resignation by employees is emerging to be a very 
common form of separation from an organization.  The decision to quit 
depends on the employee’s level of dissatisfaction with the job and the 
number of attractive alternatives available outside the organization. 
Some organizations in the Information Technology Sector have 
institutionalized the practice of welcoming their ex-employees to rejoin 
them later. This would save them induction costs and ensure person-
organization fit. 

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Some organizations have simplified the procedure to re-
appoint their ex-employees, by requiring just a single sitting with the 
reporting authority to be able to join back the parent organization. Such 
organizations have also made the procedure for exit less cumbersome 
one by enabling their claims getting processed through a single window 
clearance mechanism. The administration of separation caused by 
resignation is very simple as it is unlikely to result in any dispute except 
the notice period or timely settlement of dues on either side. 
The average tenure expectancy of employees within an organization 
has been steadily in the decline. From a life-long career path spanning 
over three decades, the average tenure has come down to five years and 
is shrinking further. Employees might want to leave the organization for 
reasons of better pay, working conditions, opportunities to learn and 
grow, or may cite ill health or domestic responsibilities to quit their 
positions. In any case, they would be required to serve a notice period by 
which they would be able to handover their duties and responsibilities to 
another incumbent.  Causes for resignations are investigated during the 
exit interview wherein, the outgoing employee is requested to share his 
feedback about his working experiences in the organization. 
The net result of organizational changes would be that of the jobs 
becoming more amorphous and more difficult to define. Changes are 
also taking place at individual jobs. A large number of poor performers at 
one job or organization are sometimes found to become solid successes at 
another, in which case the organization has to deliberate on its inherent 
deficiencies that caused a failure in tapping the right performance levels 
from them. Similarly, if successive incumbents in a post fail to perform 
or retain their jobs, then the attention should be focused on the system 
in which the work is done or on the job content itself, rather than the 
individuals. Such jobs are called as “Widow-maker Jobs” in Management 
Jargons of the west. 
According to the management thinker and writer Peter Drucker, 
the workable solution for the problem would be to eliminate the job itself 
by redesigning the positions and responsibilities in a more practical and 
pragmatic manner.  Some organizations resort to a method of easing out 
employees slowly and progressively.  Referred to as Golden Parachuting, 
this method involves providing the employees adequate time of tenure 

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and/or financial security to prepare themselves for facing life outside 
their employment. This kind of arrangement could be contractual and 
are often available for highly skilled human resources.