Standard Procedure for Departmental / Domestic Inquiry in an organization

This is a step-by-step procedure for conducting a Departmental Inquiry (also known as a Domestic Inquiry) in an organization setup in India. This process must strictly follow the Principles of Natural Justice to ensure the findings stand up in a Labour Court or Tribunal.

Objective: To conduct a fair and impartial inquiry into misconduct in adherence to the Principles of Natural Justice.

The disciplinary process follows a logical lifecycle divided into Incident, Inquiry, and Action. It begins with the Incident phase, where the alleged misconduct is detected, a preliminary investigation establishes a prima facie case, and a formal Charge Sheet is served to the employee. If the charge is denied, the process moves to the Inquiry phase, a quasi-judicial stage where an impartial Inquiry Officer records evidence, allows cross-examination, and ensures the Principles of Natural Justice are followed to determine guilt or innocence. Finally, the Action phase concludes the matter, where the Disciplinary Authority reviews the inquiry findings, provides the employee a copy of the report, and issues a final speaking order imposing a penalty or exonerating the employee based on the proven facts.

Phase 1: The Pre-Inquiry Stage

1. Preliminary Investigation (Fact-Finding)

• Purpose: To determine if there is a prima facie case (sufficient initial evidence) against the employee.

• Action: Management collects complaints, witness statements and documentary proof.

• Result: If the misconduct appears genuine, proceed to the charge sheet.

2. Drafting and Issuing the Charge Sheet

• Requirement: The charge sheet must be precise and unambiguous.

• Details to Include:

  • Date, time, and location of the incident.

  • Specific clause/number of the Standing Orders or Service Rules that was violated.

  • A list of witnesses and documents (evidence) management intends to rely on.

• Service: Must be served via Hand Delivery (with signature) or Registered Post/Speed Post.

3. Consideration of Explanation

• The employee is given a specific timeframe (e.g., 48, 72, or 96 hours) to submit a written explanation.

• If Satisfactory: The case is dropped or a simple warning is issued.

• If Unsatisfactory (or no reply received): Management decides to hold a domestic inquiry.

4. Appointment of Officials

• Management issues a formal order appointing:

  • Inquiry Officer (IO): The judge of the proceedings (must be impartial). Click here for Draft Order of Appointment of Inquiry Officer

  • Presenting Officer (PO): Represents the management/company side.

Phase 2: The Inquiry Proceedings

5. Notice of Inquiry

• The Inquiry Officer (IO) issues a notice to the employee (Charge-Sheeted Employee or CSE) stating the Date, Time, and Venue of the first hearing.

• Advisable: Provide 7-10 days' notice for the first hearing.

6. First Hearing (Preliminary)

• Recording Presence: The IO records the names of everyone present.

• Defense Assistance: The IO asks the employee if they need a "Defense Assistant" (co-worker/union rep).

• Plea: The IO reads the charges and asks: "Do you admit or deny the charges?"

  • Admit: Recording of admission and closure of evidence.

  • Deny: The inquiry proceeds to the evidence stage.

7. Management Evidence (Prosecution)

• Examination-in-Chief: The PO questions management witnesses to prove the charges.

• Cross-Examination: The employee/Defense Assistant questions management witnesses to test their testimony.

• Exhibits: Documents are formally marked (e.g., Ex-M1, Ex-M2) and signed by the IO.

8. Defense Evidence

• Examination-in-Chief: The employee questions their own witnesses.

• Cross-Examination: The PO questions the defense witnesses.

• Statement: The employee may choose to testify themselves.

9. General Examination (Court Questions)

• The IO may ask the employee clarifying questions regarding the evidence presented against them to give them a final opportunity to explain.

10. Written Briefs

• The IO may request both the PO and the Defense to submit written closing arguments summarizing their respective cases.

Phase 3: The Verdict & Final Order

11. Inquiry Report (Findings)

• The IO analyzes the evidence and writes a reasoned report.

• Conclusion: The IO states if charges are "Proved," "Partially Proved," or "Not Proved."

• Note: The IO does NOT decide the punishment.

12. Supply of Report (Second Show Cause)

• The Disciplinary Authority (DA) sends a copy of the Inquiry Report to the employee.

• Opportunity: The employee is given time (e.g., 7-15 days) to submit a representation challenging the IO's findings.

13. Final Decision and Penalty Order

• The DA reviews the employee's reply.

• Order: The DA issues a final "Speaking Order" (order with reasons) imposing a penalty (e.g., Suspension, Demotion, Dismissal) based on the gravity of the misconduct.

Critical HR Checklist

• [ ] Daily Order Sheets: Ensure a daily sheet is written and signed by all parties for every hearing date.

• [ ] Service Proof: Keep postal receipts and acknowledgments for every notice sent.

• [ ] Impartiality: Ensure the Inquiry Officer is not a witness or directly connected to the incident.

• [ ] Natural Justice: Ensure the employee was given ample opportunity to cross-examine witnesses.

EPFO Reforms 2025: From Red Tape to Real-Time Liquidity

While the National Pension System (NPS) has been grabbing headlines with its "Multiple PRANs" update, the Employees' Provident Fund Organisation (EPFO) has quietly executed an even larger digital transformation in late 2024 and throughout 2025.

For decades, EPF was synonymous with "tedious paperwork" and "regional office delays." That era is officially over. With the rollout of EPFO 3.0 and the Centralized Pension Payment System (CPPS), the system has shifted from a "bureaucratic saving scheme" to a "high-liquidity social security tool." The groundwork for these upgrades was reviewed during the 113th Executive Committee meeting (Source: PIB Press Release, March 29, 2025).

The exclusive breakdown of the massive reforms effective late and till December - 2025 are as under.

1. The "Anywhere Pension" Revolution (CPPS)

Effective Date: January 1, 2025 Impact: Pensioners, HR Depts

Previously, if a retired employee moved from Gujarat to Maharashtra, they had to physically transfer their Pension Payment Order (PPO) from one bank branch to another. This often took 3–6 months, during which the pension was stopped.

The Reform: The Centralized Pension Payment System (CPPS) is now live.

• National Database: There are no "Regional" PPOs anymore. Your PPO is central.

• Benefit: Pensioners can receive their pension in any bank, any branch, anywhere in India.

• No Transfer Needed: A pensioner can move cities or change banks without notifying the EPFO regional office. The system uses NPCI rails to credit pension directly to the Aadhaar-seeded bank account. (Source: PIB Press Release - January 3, 2025)

2. The New "75-25" Liquidity Rule (The Unemployment Shift)

Status: Implemented 2025 Impact: Exiting Employees, Resignations

This is the most critical change for HR professionals to explain to exiting staff. The old rule allowed full withdrawal after 2 months of unemployment. The new rule balances instant help with long-term protection.

• 1 Month of Unemployment: Member can withdraw 75% of the total EPF corpus (Employee + Employer share) immediately.

• 12 Months of Unemployment: The remaining 25% can be withdrawn only after being unemployed for 1 year (increased from 2 months).

Why this matters: It prevents employees from draining their entire retirement savings during short career breaks, while still giving them substantial cash (75%) to survive.

3. The "36-Month" Pension Lock-in (EPS)

Status: Implemented 2025 Impact: Preventing Service History Loss

Historically, young employees would withdraw their EPS (Pension) money (Scheme Certificate withdrawal) after just 2 months of unemployment, effectively resetting their service history to zero. This meant they often failed to reach the 10-year service mark needed for a lifelong pension.

The Reform:

• You can now withdraw the EPS (Pension) lump sum only after 36 months (3 years) of continuous unemployment.

• Strategic Intent: This forces employees to take a Scheme Certificate (which preserves service years) rather than cash. This ensures that when they join a new job, their past service adds up, helping them qualify for a higher pension at age 58.

4. Auto-Settlement Limit Hiked to ₹5 Lakhs

Status: Effective June 2025 Impact: Medical & Marriage Advances

The "Auto-Claim Settlement" facility (processed by AI without human officer intervention) was previously capped at ₹1 Lakh.

The Reform:

• New Limit: ₹5 Lakhs.

• Scope: Illness, Education, Marriage, and Housing.

• Speed: Claims are settled within 72 hours (3 days).

• Condition: KYC (Aadhaar, PAN, Bank) must be fully seeded and validated. (Source: Ministry of Labour & Employment Press Release - June 24, 2025)

For HR: This drastically reduces the number of queries employees bring to the HR desk regarding "PF Advance status."

5. Simplified Withdrawal Categories (3 vs 13)

Status: Implemented late 2025 Impact: Ease of Living

Previously, Para 68 had over 13 complex subsections (68J, 68N, 68K, etc.) for different advances, each with different document requirements.

The Reform: All advances are now merged into just 3 Broad Categories:

1. Essential Needs: Illness, Education, Marriage.

2. Housing Needs: Purchase, Construction, Repayment.

3. Special Circumstances: Unemployment, Natural Calamity. Note: The frequency limit for Education withdrawals has been increased to 10 times, and Marriage to 5 times.

6. End of "Employer Dependency" (Annexure K & Transfers)

Status: Live 2025 Impact: Ease of Job Switching

• Annexure K Download: Previously, employees had to beg the PF office to get "Annexure K" (Transfer detail) to prove their service history to a new employer. It is now directly downloadable from the Member Portal.

• Auto-Transfers: For fully KYC-compliant members, fund transfer upon joining a new company is now largely automated, removing the need for the previous employer's Digital Signature (DSC) approval in many cases. (Source: EPFO Circular No: WSU/Transfer Claim/2025-26/33 - September 18, 2025)

A HR Perspective

These reforms are a double-edged sword.

• The Good: The ₹5 Lakh auto-limit and CPPS are massive administrative reliefs. The reduced dependency on employers for transfers is excellent.

• The Caution: The 36-month lock-in on EPS and the 1-year wait for full EPF settlement will frustrate employees who want "all their money now" when they quit. As HR, we need to educate them that this friction is designed to save their pension eligibility for the long run.

Disclaimer: This article is for information only and is based on the latest EPFO circulars and press releases available as of December 2025. Rules are subject to change by the CBT (Central Board of Trustees).

By HRMIT - A HR Professional

You may like to see : National Pension System (NPS): Changes in Rules including Multiple PRANs & 80% Withdrawal rules

The HR Generalist Guide - Employee Relations & Investigations

Welcome to Chapter 6 of The HR Generalist’s Blueprint: A Complete Operational Guide.

We have now entered the "messy middle" of Human Resources. You have hired them (Part 2), but now you have to manage them.

Employee Relations (ER) is often the most stressful part of a Generalist's job. It is where human emotions clash with company policy. One day you are mediating a petty argument about the office thermostat; the next day you are investigating a serious harassment claim that could bankrupt the company.

In this domain, you are not an "Employee Advocate." You are a Neutral Fact-Finder. Your job is not to take sides; it is to find the truth and protect the organization from risk.

Key Takeaways:

• The Trap: "The Open Door Policy" does not mean "The Confidentiality Vault." Never promise total secrecy.

• The Method: Use the IBR (Interest-Based Relational) approach to solve peer conflicts.

• The Investigation: Follow the "Seven Tests of Just Cause" before terminating anyone for misconduct.

You may also like to see : The HR Generalist Guide to Offboarding - The Art of the "Good Goodbye"

6.1 The "Open Door" Policy: Trust vs. Secrets

Every handbook says, "We have an Open Door Policy." But most employees misunderstand what this means.

If an employee comes to you and says, "I want to tell you something about my manager, but you can't tell anyone," STOP THEM IMMEDIATELY.

The HR Script:

"I want to hear what you have to say, and I will keep this as confidential as possible. However, if you tell me about something illegal, unsafe, or a violation of our harassment policy, I am legally required to act on it. I cannot promise total silence."

Why this matters: If you promise silence and they confess to sexual harassment, and you do nothing, you (and the company) can be sued for negligence.

6.2 Conflict Mediation: The Referee

Not every complaint requires an investigation. 90% of ER issues are just personality clashes. Your goal is to get the employees to solve it themselves so you don't become the "Office Parent."

Use the Positions vs. Interests framework.

Feature	The Position (What they say)	The Interest (What they actually need)
Employee A	"I refuse to work with Mike because he is rude."	"I need clear instructions without sarcasm so I can do my job fast."
Employee B	"I'm not rude; she is just too slow."	"I need the data by 2:00 PM to meet my deadline."
HR's Role	Do not debate "Rude vs. Slow."	Build a process where A gets data to B by 2:00 PM without talking.

Action Step: When mediating, force them to speak to each other, not you. If they look at you, gesture toward the other person. You are the facilitator, not the judge.

6.3 Conducting Investigations: The "CSI" of HR

When an allegation crosses the line into misconduct (Theft, Harassment, Discrimination, Violence), mediation stops. Investigation begins.

This is a legal process. If you mess this up, the termination will be overturned in court.

Step 1: Immediate Interim Measures

If the allegation is severe (e.g., physical threat), you must remove the accused from the workplace immediately. Place them on "Paid Administrative Leave" pending the investigation.

• Why Paid? If you suspend them without pay and they are innocent, you have waged theft issues. If they are guilty, you can stop pay later.

Step 2: The Interview Protocol (The Funnel Method)

Interview the accuser first, witnesses second, and the accused last. Use the funnel technique:

1. Open-Ended: "Tell me about the events of Tuesday the 12th."

2. Specific: "Who else was in the room?"

3. The "Hard" Question: "Did you touch her shoulder?"

Crucial Rule: Take verbatim notes. Do not write "He got angry." Write "He slammed his fist on the table and yelled 'This is garbage'." Facts, not feelings.

Step 3: The Verdict (The Standard of Proof)

You are not a criminal court. You do not need "Proof Beyond a Reasonable Doubt" (99% certainty).

You need "Preponderance of the Evidence" (51% certainty).

• Ask yourself: "Based on the interviews and emails, is it more likely than not that this happened?"

6.4 The "Seven Tests of Just Cause"

Before you fire someone for misconduct, run your investigation through this checklist (derived from labor arbitration standards). If you answer "No" to any of these, your termination might be risky.

1. Notice: Did the employee know the rule existed? (Check the signed Handbook).

2. Reasonableness: Was the rule reasonable?

3. Investigation: Did you investigate before firing?

4. Fairness: Was the investigation fair and objective?

5. Proof: Do you have substantial evidence (51%)?

6. Equal Treatment: Have others done this and not been fired? (Consistency is key).

7. Penalty: Does the punishment fit the crime? (Don't fire a 10-year veteran for being 5 minutes late once).

Chapter 6 Summary Checklist

Before closing an ER case, ensure you have documented everything:

• [ ] The Warning: Did I explain the limits of confidentiality before they started talking?

• [ ] The Notes: Are my interview notes dated, signed, and factual (no opinions)?

• [ ] The Evidence: Have I saved screenshots, emails, or Slack messages related to the incident?

• [ ] The Consistency: Am I treating this person the same way I treated the last person who did this?

Next Step: Once the drama is resolved, we must focus on the daily grind of productivity. How do we tell an employee they aren't doing a good job? In Chapter 7, we will cover Performance Management: Moving from Annual Reviews to Continuous Feedback.

By HRMIT - A HR Professional

The End of Privacy: How the New Tax Bill Turns Your Phone into an Open Book

While accessing YouTube and social media recently, I came to know about the strict provisions and expanded powers granted to the Income Tax Department under the new Income Tax Bill, 2025, which is going to be implemented from FY 2026 – 27, effective from 1^st April 2026. 

Hence, I thought to gather information on this and share it with my network. While gathering the information, I was shocked to learn that the IT Department can effectively bypass your constitutional right to privacy to track your transactions. This may lead to the exposure of non-financial private information such as your personal photos, chats, and location history leaving taxpayers with almost zero digital secrecy.

We are moving from an era of "voluntary compliance" to "Evidence-Based Enforcement." I gathered the information on such critical provisions we need to know.

1. The New "Digital Search" Powers (Clause 247)

The most controversial change is the redefinition of a "search." Previously, tax officers seized physical files or cash. The new Bill introduces the concept of "Virtual Digital Space."

• Total Access: This definition covers your email accounts, social media profiles, cloud storage (Google Drive, iCloud), mobile devices, and encrypted messaging apps.
• The "Codebreaker" Power: If a taxpayer refuses to provide a password during a search, the authorized officer is empowered to "override the access code" (hack/break the password) to gain entry.
• No "Intimation" Required: During a search operation, officers do not need your permission to access this data. If you are uncooperative, they can bypass your consent entirely to clone your device.

2. The "84% Tax" Trap (Section 115BBE)

You may have heard rumours about an "84% tax." This is real and it applies to Unexplained Income. Under Section 115BBE, if the Department finds an asset (cash, gold, or a digital investment) for which you cannot explain the "Source of Funds," you are not taxed at your normal slab rate (30%). You are taxed at a flat 60%.

• The Calculation of Ruin:
• Base Tax: 60%
• Surcharge: 25% of the tax (which adds 15%)
• Health & Education Cess: 4%
• Effective Rate: ~78%
• The Penalty Kicker: If the income is not voluntarily disclosed in your return and is found during a search/survey, an additional penalty can push the total liability up to 84%.
• No Deductions: You cannot claim any expense or basic exemption limit against this income. If you have ₹10 Lakhs of unexplained cash, you may be left with less than ₹1.6 Lakhs after the department is done.

3. "Source of Funds" Scrutiny

The days of buying property or luxury cars with "savings" are over unless those savings are documented.

• The Trigger: High-value transactions (credit card bills > ₹10 Lakhs, property purchases, foreign travel) are automatically reported to the ITD via the Statement of Financial Transactions (SFT).
• The Inspection: Officers are now authorized to question the "Source of Funds" for these expenses. If your declared income is ₹12 Lakhs but you bought a car worth ₹25 Lakhs, you must prove where the extra money came from. If you cannot, it is treated as "Unexplained Income" and taxed at the 84% rate mentioned above.

4. Responsibility of the Taxpayer (Not the CA)

A crucial clause in the new regime emphasizes that the primary liability lies with the individual, not their Chartered Accountant (CA) or Tax Return Preparer.

• The Myth: "My CA filed it, so it's his fault."
• The Reality: If your return contains a fake deduction (e.g., a bogus political donation or inflated HRA) to get a refund, you will face the legal action, penalty and potential prosecution. You cannot shift the blame to your agent. Ignorance of the law is no longer a valid defense.

Conclusion: Transparency is the Only Shield

The Income Tax Bill 2025 (effective FY 2026-27) has effectively removed the walls of financial privacy. As responsible citizens, we must adapt.

1. Check your AIS: Ensure your declared income matches the government's data.
2. Separate Your Lives: Adopt a "Clean Phone Policy." Do not keep business/financial records on personal devices used for private family matters.
3. Document Everything: Every high-value purchase must have a clear, traceable banking trail.

Disclaimer: This article is based on information I gathered on the provisions of the proposed Income Tax Bill, 2025 and existing Section 115BBE norms. Please treat it as information only and not the advice. Please do consult a tax advisor for specific legal advice.

... Income Tax Bill 2025 Explained: New Slabs, Key Changes, Refunds, Housing Relief & More

This video provides a detailed breakdown of the new Income Tax Bill 2025, explaining the major changes in tax slabs and refund rules that every taxpayer needs to understand.

By HR MIT – A HR Professional

You may like to read : NPS : Tax Liability in Case of Multiple PRANs-The "15-Year Rule" & The 80% Trap

NPS : Tax Liability in Case of Multiple PRANs-The "15-Year Rule" & The 80% Trap

The National Pension System (NPS) has fundamentally changed. With the introduction of the Multiple Scheme Framework (MSF) and the December 2025 PFRDA Exit Rules, the old rigid structure is gone. We now have the ability to hold Multiple PRANs (one per CRA) and exit much earlier than age 60 without the "premature exit" penalty.

However, while PFRDA regulations have become highly flexible, the Income Tax Act has not yet fully aligned with these changes. This creates a specific "Tax Trap" that every investor running multiple PRANs must understand.

Here is the detailed breakdown of the tax liabilities.

1. The Core Principle: Independent Tax Treatment

Under the new "One Person, Multiple PRANs" architecture, each PRAN is treated as a distinct legal entity for tax purposes.

• No Aggregation: The corpus of PRAN 1 (e.g., NSDL) is not clubbed with PRAN 2 (e.g., KFin) for calculating exit limits.
• Independent Exits: You can trigger a "Normal Exit" from PRAN 2 while keeping PRAN 1 active for another 10 years.

2. The New "15-Year Rule" for Normal Exit

Historically, any exit before age 60 was treated as "Premature," mandating an 80% annuity lock-in. This was the biggest drawback of NPS.

The Change (Dec 2025): The PFRDA has redefined "Normal Exit" for the All Citizen Model.

• Rule: If you have completed 15 years of subscription, you can exit the PRAN even if you are not yet 60.
• Status: This is treated as a Maturity/Superannuation Exit, not a Premature Exit.
• Liquidity: You are eligible for the 80% Lump Sum withdrawal option, just like a retiree at age 60.

3. The "Tax Trap": PFRDA 80% vs. IT Dept 60%

This is the most critical section. While PFRDA now allows you to withdraw 80% of your corpus as a lump sum, the Income Tax Act (Section 10(12A)) presently explicitly exempts only 60% of the total corpus.

If you utilize the full 80% withdrawal limit allowed by PFRDA, you will trigger a tax liability on the differential amount.

The Calculation Logic

• Total Corpus: ₹50 Lakhs
• Withdrawal limit (PFRDA): 80% = ₹40 Lakhs
• Tax-Free Limit (IT Act): 60% = ₹30 Lakhs
• Taxable Amount: ₹10 Lakhs (The extra 20%)

Tax Liability Table:

Component	PFRDA Rule	Income Tax Status (FY 2025-26)	Tax Impact
First 60% (Lump Sum)	Allowed	Exempt u/s 10(12A)	₹0 Tax
Next 20% (Lump Sum)	Allowed	Taxable Income	Added to Annual Income (Taxed at Slab Rate)
Last 20% (Annuity)	Mandatory	Exempt at Investment	₹0 Tax (at time of exit)
Annuity Income	Monthly Pension	Taxable Salary	Taxed at Slab Rate in future years

 To ensure a 100% tax-free exit, it is safer to withdraw only 60% as lump sum and put 40% into Annuity, unless the Finance Ministry amends Section 10(12A) in the upcoming Budget 2026.

4. Scenario Analysis: Multiple PRAN Strategy

Let’s apply this to a practical scenario where you have two PRANs.

The Setup:

• PRAN 1 (Core Retirement): Started at age 30, matures at age 60.
• PRAN 2 (Mid-Term Wealth): Started at age 35, matures at age 50 (15-year tenure).

Tax Implications:

PRAN 2 (Exiting at Age 50 after 15 Years)

Since this meets the 15-year criteria, it is a Normal Exit.

1. Lump Sum (60%): You withdraw this completely Tax-Free.
2. Annuity (40%): You purchase an annuity. The capital is safe, but the monthly pension you start receiving immediately (at age 50) will be added to your salary income and taxed.
3. Result: You have successfully created a tax-free liquidity event at age 50 without the 80% lock-in penalty.

PRAN 1 (Exiting at Age 60)

1. Lump Sum (60%): Tax-Free.
2. Annuity (40%): You purchase a second annuity. This pension income is added to your existing pension from PRAN 2.

5. Conclusion & Recommendation

The "Multiple PRANs" feature coupled with the "15-Year Rule" effectively turns NPS into a mid-term investment vehicle (15-year lock-in) rather than just a retirement one.

However, until the Income Tax Act is amended to match the PFRDA’s 80% withdrawal rule, limit your lump sum withdrawal to 60%. Taking the full 80% today creates an unnecessary tax burden on that extra 20%, defeating the purpose of a tax-efficient exit.

Quick Summary

• Multiple PRANs: Taxed independently.
• 15 Years: The new "Maturity" age for secondary PRANs.
• Safety Limit: Withdraw 60% to stay tax-free.
• Risk: Withdrawing 80% attracts tax on the extra 20%.

Disclaimer: This article is only sharing the information which I know through reliable source / seminar. For better understanding and to choose it as one of the investment options, please take advice and consult a financial expert.

 By HRMIT – A HR Professional

You would like to see : National Pension System (NPS): Changes in Rules including Multiple PRANs & 80% Withdrawal rules

The HR Generalist Guide to Offboarding - The Art of the "Good Goodbye"

Welcome to Chapter 5 of The HR Generalist’s Blueprint: A Complete Operational Guide.

We spend weeks planning how to welcome a new hire (Chapter 4), but we often spend only minutes planning how to say goodbye. This is a strategic mistake.

How an employee leaves your company is just as important as how they arrived. A poor offboarding process creates two major risks:

1. Security Risk: Ex-employees retaining access to sensitive data (IP theft).

2. Reputation Risk: An angry ex-employee can destroy your employer brand on Glassdoor in 5 minutes.

As an HR Generalist, you must shift your mindset: An ex-employee is not a traitor. They are a potential customer, a future partner, or even a "Boomerang" hire.

Key Takeaways:

• The Data: The Exit Interview is the only time you will get 100% brutal honesty about your culture. Don't waste it.

• The Shield: IT security must happen during the exit meeting, not after.

• The Network: Treat alumni as brand ambassadors, not outcasts.

5.1 The Exit Interview: Mining for Gold

Most companies treat the exit interview as a formality. They ask, "Why are you leaving?" on the employee's last day.

• The Problem: On their last day, the employee just wants to leave. They will give you a polite, fake answer like "I just found a better opportunity." This data is useless.

• The Solution: Schedule the interview 3-4 days before their last day. Make it clear that this data is confidential and will help improve the company for their friends still working there.

The "High Value" Question Framework

Stop asking Yes/No questions. Use these specific prompts to uncover root causes:

Generic Question (Low Value)	Strategic Question (High Value)	What this tells you
"Did you like working here?"	"If you could change one thing about your manager's style, what would it be?"	Reveals leadership gaps.
"Was the pay okay?"	"Is the new position offering a different compensation structure (e.g., better bonus/benefits) that we lack?"	Reveals market competitiveness.
"Why are you leaving?"	"What was the specific moment you decided to start looking for a new job?"	Reveals the "trigger event" (e.g., a bad review, a denied promotion).

Pro Tip: If you notice a trend (e.g., 3 people leaving the same department in 6 months), you have a "Toxic Manager" problem, not a "Market" problem.

5.2 Security & Logistics: The "Kill Switch"

While you want to be kind, you must also be secure. The most dangerous time for data theft is the "Notice Period."

You need a coordinated "Kill Switch" protocol with your IT department.

The Security Checklist:

1. Asset Retrieval: Do not rely on promises. Send a courier to collect laptops/phones if the employee is remote. withhold the final experience letter (if legal in your region) until assets are returned.

2. Access Revocation:

   • Email/Slack: Disable exactly at 5:00 PM on the last day.

   • Shared Drives: If the employee is going to a competitor, restrict access to sensitive folders during the notice period.

3. The "Ghost" Accounts: Check for "Shadow IT." Did the employee create a Canva, Dropbox, or GitHub account using their work email? Ensure those are transferred, not just deleted.

5.3 Alumni Networks: Turning Ex-Employees into Ambassadors

The relationship should not end on Friday at 5:00 PM.

Companies like McKinsey and Google have massive "Alumni Networks." You can do this on a smaller scale.

Why bother?

1. Referrals: Good ex-employees often refer their talented friends to you.

2. Boomerangs: Sometimes the grass isn't greener. A "Boomerang Employee" (someone who returns) is a high-value hire because they already know the culture and product. Zero training required.

Actionable Step: Create a "Company Alumni" LinkedIn Group. Once a quarter, post an update about company wins or new job openings. Keep the bridge open.

Chapter 5 Summary Checklist

This concludes Part 2: The Employee Lifecycle. Before moving to Part 3 (Culture & Retention), ensure your offboarding is secure:

• [ ] The Schedule: Is the Exit Interview booked for 3 days before the final day?

• [ ] The IT Ticket: Is there an automated request sent to IT to revoke access at a specific time?

• [ ] The Compliance: Have you prepared the final paycheck including unused vacation days (per local law)?

• [ ] The Handover: Did the manager certify that the employee transferred all files/knowledge before you signed off?

Now that we have mastered the lifecycle of hiring and firing, we must master the messy middle: managing human behavior. In Chapter 6, we begin Part 3 with Employee Relations: The Open Door Policy & Investigations.

National Pension System (NPS): Changes in Rules including Multiple PRANs & 80% Withdrawal rules

The National Pension System (NPS) has undergone its most significant overhaul since its inception. Once a rigid pension product, NPS has evolved into a highly flexible, market-linked wealth creation tool.

With the introduction of the Multiple Scheme Framework (MSF) in October 2025 and the revised Exit Regulations in December 2025, subscribers now have unprecedented control over their retirement corpus. This article breaks down the fundamental concepts of NPS, the new "One Person, Multiple PRANs" architecture and the enhanced tax benefits.

1. What is the National Pension System (NPS)?

The National Pension System (NPS) is a voluntary, "defined-contribution" retirement savings scheme designed to enable systematic savings during a subscriber's working life. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Unlike traditional pension plans where the return is fixed (defined benefit), NPS is market-linked. This means your final retirement corpus depends on the returns generated by the asset classes you choose.

Key Features of NPS:

• Asset Classes: Subscribers can invest in a mix of Equity (E), Corporate Bonds (C), and Government Securities (G) based on their risk appetite.

• Account Types:

  • Tier I: The primary retirement account. It comes with tax benefits but has lock-in restrictions to ensure disciplined savings.

  • Tier II: An optional, voluntary savings account. It offers high liquidity (funds can be withdrawn anytime) but carries no specific tax benefits.

• Low Cost: NPS is known for having some of the lowest fund management charges globally, maximizing the compounding effect over time.

2. The Old NPS Framework (Before 2025)

To understand the significance of the recent changes, it is helpful to recall the limitations of the previous structure:

• Single Account: One Individual (PAN) = One PRAN (Permanent Retirement Account Number) = One CRA.

• Rigid Exit: At age 60, a minimum of 40% of the corpus had to be used to buy an annuity (pension plan).

• Limited Liquidity: Only 60% could be withdrawn as a tax-free lump sum.

• Restricted Choice: Subscribers were often limited to a single investment strategy per account.

3. Key Changes in NPS (Effective late 2025)

3.1 Multiple PRANs Architecture

The "One PAN, One PRAN" rule has been relaxed.

• New Rule: An individual can now open multiple PRANs, provided they are with different Central Recordkeeping Agencies (CRAs).

• Limit: Since there are three authorized CRAs, a single PAN holder can maintain up to three active PRANs.

• Benefit: This allows you to run independent retirement strategies simultaneously (e.g., one conservative PRAN for core pension, one aggressive PRAN for wealth creation).

3.2 The 80% Lump Sum Withdrawal Rule

The mandatory annuity requirement has been significantly reduced, offering greater liquidity.

• Lump Sum Limit: You can now withdraw up to 80% of your accumulated corpus as a lump sum upon retirement.

• Annuity Requirement: Only 20% of the corpus is now mandatory for purchasing an annuity.

• Small Corpus Exemption: If the total corpus is ≤ ₹12 Lakhs, the entire amount (100%) can be withdrawn as a lump sum without purchasing any annuity.

3.3 Multiple Scheme Framework (MSF)

Effective from October 1, 2025, the MSF allows Pension Funds to launch distinct schemes tailored to specific risk appetites.

• High-Risk Variants: New schemes allow up to 100% equity exposure (previously capped at 75%).

• Customization: You can choose different schemes for different goals (e.g., a "High Growth" scheme for long-term compounding and a "Income Generator" scheme for near-term stability).

3.4 Extended Age Limits

• Entry/Exit: Subscribers can join or continue contributing up to the age of 75.

• Deferment: Lump sum and annuity withdrawals can be deferred up to age 85, allowing the corpus to compound for longer.

4. Effective Dates Timeline

Change	Status / Effective Date
Multiple Scheme Framework (MSF)	Effective Oct 1, 2025
80% Lump Sum Withdrawal Rule	Notified Dec 2025
Multiple PRANs (One per CRA)	Implemented 2025
14% Employer Contribution (Private)	Effective FY 2025-26

5. Understanding the Multiple PRAN Structure

NPS accounts are maintained by Central Recordkeeping Agencies (CRAs). Under the new rules, you can open one PRAN with each of the following:

1. NSDL (Protean) CRA

2. KFin Technologies CRA

3. CAMS CRA

Strategic Use Case: The "Core & Satellite" Approach

With multiple PRANs, you can segregate your retirement funds:

• PRAN 1 (Safe Core): Invested in a Conservative Scheme (High Debt/Govt Bonds) to ensure basic pension security.

• PRAN 2 (Growth Satellite): Invested in a High-Equity Scheme (MSF High Risk) to maximize long-term wealth.

6. Tax Benefits: Old vs. New Regime

NPS remains one of the few tax-efficient tools under the New Tax Regime, especially regarding employer contributions.

6.1 Employer Contribution (Sec 80CCD(2))

• The Change: Previously, private sector employees were limited to a 10% deduction.

• Current Rule: Both Government and Private Sector employees can now claim a deduction for employer contributions up to 14% of Salary (Basic + DA).

• Applicability: This deduction is available under both the Old and New Tax Regimes.

6.2 Comparison Table

Feature	Old Tax Regime	New Tax Regime
Self Contribution (80C)	Eligible (within ₹1.5L limit)	Not Eligible
Exclusive Benefit (80CCD(1B))	Additional ₹50,000 deduction	Not Eligible
Employer Contribution (80CCD(2))	Exempt up to 10% (Basic+DA)	Exempt up to 14% (Basic+DA)
Lump Sum Withdrawal	Tax-Free (60% limit*)	Tax-Free (60% limit*)

Note on Tax: While PFRDA allows 80% withdrawal, the Income Tax Act currently exempts only 60% of the total corpus from tax. The remaining 20% withdrawn as lump sum may be subject to taxation unless tax laws are amended to align with PFRDA regulations.

7. Who Should Adapt to the New Structure?

1. Aggressive Investors: Those who felt the previous 75% equity cap was too low can now utilize MSF schemes for 100% equity.

2. Private Sector Employees: Ensure your employer increases the NPS contribution to 14% to maximize tax-free salary components.

3. Near-Retirees: If your corpus is substantial, the ability to withdraw 80% offers massive liquidity to pay off debts or reinvest in other avenues (like SWP in Mutual Funds) rather than being locked into low-yield annuities.

8. Conclusion

The 2025 reforms have transformed NPS from a "forced savings" product into a sophisticated investment platform.

• Flexibility: You are no longer tied to a single strategy or a single fund manager.

• Liquidity: The shift from 40% to 20% mandatory annuity solves the biggest liquidity complaint of NPS users.

• Efficiency: With the 14% employer deduction, it remains the most tax-efficient salary component for professionals.

I will share a separate article on - Tax Liability on withdrawal in Case of Multiple PRANs.

By HR MIT - A HR Professional