dr.piyush_caroli Started The Discussion:
I came accross some posts in which there were issues pertaining to the resignation of the employee being asked by the employer. I am keen to know why the employer prefers to ask for a resignation rather than terminate the employee. What are the modalities associated. Also what can happen if the employee chosses not to resign from the organisation and carry on in the company if there is not concrete reason. How does an employee ensure that all his dues will be paid in the Full and Final and what happens to the variable component payment in this case if there are no clear directives in the appointment letter or the company policy.
Request to please share your knowledge on this topic.
If the company is unable to continue or due to some financial problems they may require to reduce the manpower and for this they may have to terminate the employees, instead the employer communicate the employee to submit his resignation so that they can clear his dues & complete all the formalities like relieving letter / service certificate etc., this is a win win situation.
If termination comes in to picture then it is a long and very critical process, in case of termination the reason for leaving will be mentioned as termination which could be a critical scenario for the out going employee, even the employee challenges then its a time consuming process. In general every appointment letter consists of notice period and the management can issue a notice and after completion of notice period they can settle accounts.
If the management asks the employee and the employee respondes positively the management shall clear the dues even the employee don't responds positively also it is mandatory for the employer to clear the dues under payment of wages act and the employee can approach leagally or the concerned labour department officials.
As far as Variable pay is concerned there should be a document / agreement and both parties should abide by the agreement and clear the payments. If there is no document on variable pay then it depends on the wish and will of the mangement and the employee can't insist on the same. Normally every organization will issue a clear document on payment of variable pay along with the targets (monthly / quarterly / half-yearly/ annually) measurement creteria etc., basing on which the employee claims and the management clears the payment if not it depends on the gratus of the management. The employee should insist for the document at the begining where the management declared such type of incentives.
There are various reasons for the company to ask for resignation instead of terminating the individual.
Firstly, it is to maintain the dignity of an individual and secondly it is to keep the scope for future reference intact. It is possible that your prospective employer will accept you more openly when you say that you resigned from your job for X, Y, Z reasons instead of telling that you got terminated for X, Y, Z reasons.
When the company asks you to resign, they also make sure that all your dues get cleared. However, you are expected to maintain the confidentiality of the agreement between you and the employer and not share about it with anybody.
I hope this will help. Let me know if you have any doubts. Stay in touch and take good care of yourself.
Q-I am keen to know why the employer prefers to ask for a resignation rather than terminate the employee.
A-When an employer ask for a resignation rather than termination the main reason behind it is-The employer has to pay basic Pay (Basic+DA) to the employee dpending on the notice period..
For an example:IF in a company,the notice period is of 1month,then in case of termination the company has to pay 1 month basic Pay (Basic+DA) to the employee.While in case of resignation if the employee serves complete notice period,there will be no deduction,but if any employee leaves the organization without serving the notice period/in between the notice period then employee has to pay for it to the company 1 month basic Pay (Basic+DA).
Q- what can happen if the employee chosses not to resign from the organisation and carry on in the company if there is not concrete reason. How does an employee ensure that all his dues will be paid in the Full and Final and what happens to the variable component payment in this case if there are no clear directives in the appointment letter or the company policy.
A-At the time of seperation all companies clear the dues of employees depending on the time frame mentioned in black and white.If they do not clear the same,you can sue them in labour court.
There is more than one reason for this modus operandi. Let us see them-
From Employer's point of view:
1. To reduce the man power without facing complex problems.(including weed out unwanted employees)
2. To avoid legal implications involved in termination
3. To acquire freshers, to infuse fresh blood in order to look latest and uptodate
4. Trimming man power for optimum utilisation and to cut down costs, especially when projects gets completed and new projects still awaited.
5. Sometimes to keep the total manpower within limits to avoid PF/ESI etc.
6. Sometimes swapping takes place for some strategic reasons triggered by market compulsions, mergers, de-mergers, amalgamations, dissolutions/closure etc.
From employees point of view:
1. As others said to keep the CV intact, without any black mark
2. Easy to get relieved when another offer is on hand.
3. It is always better to part like as friends, who knows one has to come back to the same employer if situation warrant. Sometimes it gives better bargain.
4. Will help in having business tie-ups, associations, mutual benefits would be easy.
When termination is better (not on negative reasons):
In case of closure -
A retrenched person will have exemptions/preferences for future careers prospects, in mergers/amalgamations, tax saving, receive full terminal benefits on notional basis etc.
Can go on like this. With regards,
It is clear that if Employee agreed to give resignation that well & good if he /she not agreed then give him /her notice peried ( as mentioned in appointment letter )or in lieu of notice peried pay.But conditional he /she should confirmed ,otherwise if he /she on probation or training management can releave same day & F & F settlement should be clear with in 24 hours.
If any employer terminate the services of their employees( say in workmen category under 2(S) of the ID Act), it attracts Sec. 25F of the ID Act. The employer has to pay the termination compensation. Without complying with the Sec. 25 F, if they terminate any employee, legal consequences are there. To avoid such legal complications, the Management prefers the employees to resign. For this Management may offer some financial benefits to employees for resigning.
In case of Supervisory/Managerial category, it all depends on the terms of appointment letter. In the appointment order if there is any clause on termination, and if it is mutually agreed by both the parties, termination can be effected with notice period or pay in lieu of notice period.
Sr. Manager HR
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