What Is LIFO?
LIFO, or Last In, First Out, is a principle sometimes applied during layoffs or retrenchment, where employees who joined the organization most recently within a specific category or role are the first to be considered for separation, prioritizing retention of longer-tenured employees.
LIFO in the Context of Indian Labour Law
The 'last come, first go' principle is specifically referenced under Section 25G of the Industrial Disputes Act, 1947, which establishes that, absent a different agreement, an employer should generally retrench the workman who was the last to be employed in that particular category, unless there is a valid, documented reason for departing from this principle.
Why LIFO Matters for HR
- Provides a fair, objective, and legally recognized basis for selecting which employees to retrench during a workforce reduction, reducing the risk of claims of arbitrary or discriminatory selection.
- Deviating from the LIFO principle requires a valid, well-documented business reason (such as specific critical skills possessed by a more recently hired employee), since deviation without justification can be legally challenged.
- Applies specifically within the same category or class of workmen, not necessarily across the entire organization uniformly.
Practical Considerations When Applying LIFO
- Clearly define the relevant employee 'category' for LIFO application, since this significantly affects which employees are compared against each other
- Document any deviation from strict LIFO order with clear, defensible business justification
- Consult legal counsel when planning any workforce reduction involving workmen covered under the Industrial Disputes Act to ensure LIFO principles are correctly applied
LIFO (Last In, First Out): Frequently Asked Questions
Is LIFO legally mandatory for all layoffs in India?
Does LIFO apply to employees who aren't classified as workmen?
This glossary entry is for general information and reflects common HR practice in India at the time of writing. Statutory thresholds, rates and deadlines change — verify against the latest official notifications or consult a qualified legal or tax advisor before acting.