Covid-19, lay off & retrenchment procedure, How can I lay off or retrench my employee under labour law are frequent question to Employment lawyer. People also want to know what is the compensation under lay off and retrenchment under Labour Law 2006. Right and obligation under Covid-19 lay off & retrenchment of employer and employee have been focused in this article.

Covid 19 and a number
Covid 19 and a number

The impact of Covid- 19 on the garments and industrial sector in Bangladesh as well as all over the world is immeasurable and devastating. Particularly, in Bangladesh, thousands of company had to stop their production to comply with the strict lock down rules and had to shut down their factories and establishments. As a result companies are overburdened in terms of staff salaries, rent and other establishment cost compare to their zero income. In addition, Ramadan and upcoming eid festival is knocking the door which will be another burden for the companies to pay festival bonuses to the employees. Considering all of these, various companies are thinking to terminate their employees by way of lay off and retrenchment.


In light of Section 2 (58) of labour law, “lay-off” means the failure, refusal or inability of an employer to give employment to a worker on account of shortage of coal, power or raw material or the accumulation of stock or the break-down of machinery. The definition did not consider the pandemic i.e. Covid- 19 as a ground of lay off. But with the view of section 12 of the Act, an employer may, at any time, if necessary in the event of epidemics or any other cause beyond his control, stop any section or sections of his establishment. In addition, If the period of stoppage of work exceeds 3 (three) working days, the workers concerned shall be laid off in accordance with the provisions of law.


The right of Lay off only can be exercised if the company does have at least 5 (Five) workers. Upon laying off any worker, the employer must pay the compensation for those, whose name is on the muster-rolls of an establishment and who has completed at least 1 (one) year of service under the employer. The amount of compensation shall be equal to half of the total of the basic wages and dearness allowance and ad-hoc or interim wages, if any, and equal to the full amount of housing allowance.  During a calendar year, no worker shall be entitled to the payment of compensation for more than 45 (forty-five) days unless there is an agreement to the contrary between the worker and the employer.

After 45 days

After the expiry of such 45 (forty-five) days, the period of lay-off   can be extended for further 15 (fifteen) days or more. During this extended lay off period, the amount of compensation shall be equal to one-fourth of the total of the basic wages and dearness allowance and ad-hoc or interim wages of the worker, if any, and equal to the full amount of housing allowance. However, during a calendar year, if a worker is to be laid-off after the first 45 (forty-five) days as aforesaid, for any continuous period of 15 (fifteen) days or more, the employer may, instead of lying off such worker, retrench him under the provision of Labour Law.


The employer can terminate a worker under the ground of retrenchment by giving one month’s notice in writing indicating the reason of retrenchment. Otherwise the employer has to pay to the worker in lieu of such notice wages for the notice period. A copy of the notice in respect of retrenchment has to send to chief inspector. In addition, the employer has paid to the worker at the time of retrenchment compensation or gratuity.   Though it is for the employer to decide which of the employee should be retrenched but other things being equal principle of “Last come first go” must be applied and the employer cannot depart from the rule without sufficient and valid reason.  The provision of retrenchment is not applicable to a closed or dead industry.

In the eye of law, of course, the employer has an options to terminate a worker under the provisions of law. But the employer before terminate any employee should consider the dedication and contribution of their worker to the company in the previous months, years or even their whole life. A mutual understanding based on sacrifice, helpful mind and sympathetic view between employer and employee may overcome this critical time in the amid of pandemic Covid-19. If you want to know more about please click here.

CLP is an expert law  firm in Dhaka Bangladesh  in dealing with matters  Covid-19, law off & retrenchment and impact on employment sector. If you need further assistance contact us-
Phone:+8801700920980. +8801947470606. Address: House 39, Road 126 (3rd Floor) Islam Mansion, Gulshan 1, Dhaka.

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