Ford India offers final severance package for Chennai unit employees

It is on average equivalent to 130 days of gross wages per completed year of service, firm says

Ford India has offered a “final revised severance package” for its employees at the Chennai unit, which is on average equivalent to 130 days of gross wages per completed year of service. The company said this was rolled out in the absence of any suitable alternative buyer.

As part of the earlier package, employees were offered 115 days of gross wages for each completed year of service, which was later revised to 124 days. Based on the current package, the cumulative average severance package was kept at Rs 41 lakh per employee. At the same time, a minimum amount of Rs 33 lakh and a maximum of Rs 85 lakh were set by the company.

Ford India said the final severance settlement offer will be valid from September 5 to September 23. It added that the employees who agree to take the current settlement will be paid wages up to September 30. “The company strongly encourages employees to accept and sign-up for the final severance settlement offer,” the company said.

The uncertainty regarding the package for the employees at Maraimalai Nagar started on September 9, 2021, when Ford India announced it was phasing out its units in India and leaving the country. A company official indicated that since the announcement of business restructuring last September, Ford has continuously made efforts to negotiate a fair and reasonable severance package with the Union, spanning 68 meetings, including meetings with labour authorities and senior government officials.

The company stated that its attempts to negotiate a fair severance package have not yielded results because of the union’s unreasonable demands — of an average of 215 equivalent days of wages per completed year of service. “Union also failed to recognise that no company which has decided to stop production on account of significant accumulated losses and no sustainable path forward can meet such demands,” the company said in a statement.

The company stated that the final severance settlement offer communicated by the company exceeds what the applicable statutes call for and is higher than the industry benchmarks. “The final severance settlement offer translates to an average of about 4.6 years or 56-month salary for each employee (from a minimum of 3.5 years that is 43 months to a maximum of 8 years that is 100 months), thus assuring employees with adequate financial cushion and adequate time to decide their next action,” the company said.

The factory has a total of around 2,000 employees. The closure of the Ford factory at Maraimalai Nagar is set to affect a total of around 40,000 jobs in total because the factory jobs are linked to many ancillary units which employ unorganised workers.

In its letter to the employees, Ford India has indicated that post the deadline of September 23, if the Company were to retrench employees and pay the statutory compensation, the employees will only be entitled to severance pay of 15 days per completed year of service.