पाठशाला Pathshala · दल Dal, The team · Lesson 14 · Build

Firing fast and fairly in India

Founders fire too late and then badly. How to name the gap and give it a fair chance, what the labour codes require and of whom, what an exit costs and how to hold the conversation.

Pathshala, The Founder Library · 11 October 2026 · 7 min read

A single blue plastic chair in the corner of a sunlit room with worn floor tiles. — Photograph: Fariz Arrazy · Pexels

Founders fire too late, and when they finally act they do it badly: a surprise meeting, a vague reason, a last salary that arrives a month later. Firing well in India means three things done in order. A fair warning with a written record. An exit that pays everything the law and the contract require, on time. And a conversation that leaves the person their dignity.

This lesson covers when to act, what Indian labour law requires and of whom, what an exit costs, how to hold the conversation and the paperwork of the last day. It is about one person leaving for performance or fit. Letting many people go for business reasons needs a lawyer from the first day of planning.

Fire fast, but not by surprise

Sam Altman’s advice is blunt: he has never met a new founder who fires fast enough, and when it is obviously not working it is unlikely to start working. He is right about the speed. The advice assumes something founders often skip, which is that the person has been told, plainly and in time, what is wrong.

Fast means weeks after the problem is clear, not days after it is first noticed. The sequence is: say what is not working in a one-on-one, specifically and with examples; agree in writing what good looks like and by when, usually four to six weeks out; check progress weekly; then decide. A person who has heard the gap named, seen it written down and had a fair chance to close it is rarely surprised by the outcome. Most leave with less anger, and some close the gap, which is the cheapest hire the company will make that year. The [one-on-ones lesson](/library/one-on-ones-and-feedback-that-lands) has the feedback method that makes the first conversation routine rather than dramatic.

Two cases do not follow this sequence. Misconduct, such as fraud, harassment or a serious breach of confidentiality, is a disciplinary matter with a process of its own: a written charge, a chance to respond, an inquiry by someone not involved and a reasoned decision. And a role that no longer exists is a business decision rather than a judgement of the person, and should be described that way to them and to the team.

What the law asks, and of whom

Indian law treats people differently by the work they do. The Industrial Relations Code, in force with the other labour codes since 21 November 2025, protects a “worker”, a category that the government’s summary says covers supervisory employees earning up to ₹18,000 a month and that leaves out people employed mainly as managers. The test turns on the person’s main duties rather than the title, so take a lawyer’s view before assuming that anyone below a manager falls outside it.

For a worker, an exit that is not a disciplinary dismissal can engage the code’s retrenchment rules. As Lakshmikumaran & Sridharan’s calculator sets out, a worker with a year of continuous service is owed one month’s notice or pay in lieu, and compensation of fifteen days’ average pay for every completed year of service, with any part year of six months or more counted as a year. The code adds a contribution to a re-skilling fund of fifteen days’ wages for each worker retrenched, paid on top of the compensation and credited to the worker within forty-five days.

For managers and most senior staff the employment contract governs: the notice period it states, any severance it promises and the grounds it allows. That makes the appointment letter, which the codes now make mandatory, the most important document in any exit. If it says two months’ notice either way, that is what the company owes. The [offer letters lesson](/library/employment-contracts-offer-letters-that-hold-up) covers what that letter should say before anyone needs it.

Some things are owed to everyone. Wages to the last working day, with allowances, must be paid within two working days of removal, dismissal, retrenchment or resignation under section 17(2) of the Code on Wages, which, as an analysis in LiveLaw explains, carries no wage ceiling and so reaches managers too. Gratuity is owed after five years of continuous service, or after one year for a fixed-term employee, at fifteen days’ wages for each year, computed as last wages × 15 ÷ 26 × years and capped at ₹20 lakh; it runs on its own timeline. Earned leave is paid out as the leave policy and the law provide. These positions were checked on 10 October 2026.

What the exit costs

Take an engineer on ₹1.5 lakh a month, half of it counted as wages, three and a half years in, on a two-month notice period that the company pays out rather than asking her to serve, with twelve days of leave in hand. She is not yet due gratuity. Notice pay is ₹3 lakh and leave about ₹60,000. If she is a worker under the code, retrenchment compensation for four counted years adds about ₹1.7 lakh. The company then chooses what to add. Two weeks of pay for each year of service, as goodwill, comes to about ₹2.4 lakh here. Set your own case.

Read the two halves separately. What is owed is not a negotiation: pay it in full and on time. What is chosen is where the company says what kind of employer it is. Severance buys three things: a person who leaves without a grievance, a team that sees how people are treated, and a signed release. It should never be made conditional on giving up wages that are already owed.

Fire fast once the gap has been named, written down and given a fair chance. Pay what is owed within two days. Be generous with what is not.

The conversation

Hold it early in the week and early in the day, in private, with the manager leading and one other person present, usually a founder or whoever handles people. Ben Horowitz’s rule for layoffs holds for a single exit: managers must let their own people go rather than handing the job to HR or an outsider. It is the manager’s decision, and the person deserves to hear it from them.

The meeting takes fifteen minutes and has three parts. The decision, in the first sentence: “We have decided to end your employment, and today is your last working day.” The reason, in two sentences, referring to the conversations already held and the plan already written, and never reargued. And what happens next, in detail: the notice pay, the settlement date, the severance and its terms, the relieving and experience letters, the reference the company will give, what the team will be told and when the laptop comes back. Hand over a letter that says all of it.

Do not argue, do not apologise for the decision and do not hint that it might change. Let the person ask questions and answer what you can. Offer them a say in how the team is told and whether they want to say goodbye. Then tell the team the same day, briefly and without the reasons: the person has left, and the company is grateful for their work on a named piece of it. As Horowitz writes, the message is for the people who are staying, and they are watching whether the company treats people with respect once it no longer needs them.

The paperwork and the last day

Before the meeting: the termination letter, the full and final settlement worked out to the rupee, the relieving letter drafted, the release and severance terms if there are any, and a list of the accounts to close. After it: access removed within the hour, company property collected against a receipt, the settlement paid within two working days, the provident fund exit and transfer started, gratuity paid where due, and Form 16 issued after the year ends. The relieving and experience letters matter more in India than in many markets, because the next employer will ask for them. Issue them promptly and never hold them hostage to the return of a laptop.

A stack of old paper files in brown folders tied and piled on a shelf. — The file is the company’s account of what happened: the plan, the weekly notes, the letter and the settlement. Keep it. Photograph: Adil Khan Marwat · Pexels

Keep the file: the written plan, the weekly notes, the termination letter, the settlement and the release. If the exit is ever challenged, the file is the company’s account of what happened. A company without one has only its memory to offer, and so does the person who left.

The firing checklist

Before deciding: has the gap been named in a one-on-one, written down with a date and checked weekly for four to six weeks? Is this about performance, misconduct or a role that no longer exists, and is the process the right one for which it is? Is the person a worker under the code, and what does the appointment letter say about notice?

Before the meeting: the settlement computed, the letters drafted, a lawyer’s view on anything unusual, the severance and release decided and the message to the team written. In the meeting: the decision in the first sentence, the reason in two, the next steps in detail and a letter handed over. After it: access closed, wages paid within two working days, letters issued and the team told the same day.

Once a quarter, look back at every exit and ask one question: how long passed between the first time the problem was noticed and the first time someone said it out loud? That gap, more than the speed of the final decision, tells a founder whether they fire fast enough. The [culture lesson](/library/culture-is-what-you-tolerate) explains why the team is measuring it too.

The labour codes, their rules and state laws change, and who counts as a worker turns on the facts. Nothing here is legal, tax or investment advice; take a lawyer’s view before every exit.