Hello, I had been working for a Multinational Bank for the last 2 years and 3 months. Their employment offer says "Either party can terminate the employment contract without assigning any reason with a notice of 3 months or in lieu salary." After 12 months of joining the firm, I went on maternity leave as per the company policy. I was not given any increment and bonus that year because of my maternity leave. In the last 4 months, my company was asking all employees in the Banking division to resign from their jobs. After much persuasion, most of the team members, including my immediate boss, resigned. When I confronted them about the reasons, they stated that it was due to market recession and my alleged underperformance, to which I opposed and clarified that my appraisal process had not happened in the last 15 months, and there was no formal notification of my non-performance. The pressure increased, subjecting me to surrender and submit my resignation. I was on sick leave from December 9th - 12th, 2008 when HR sent me the termination letter dated December 10th, 2008 via registered post to my house address under the clause "Employment terminated without assigning any reason." This letter was delivered to my residence on December 16th, 2008. I accepted my fate and thought of departing on good terms. My last decided date was December 31st, 2008, and for the rest of the period, they agreed to pay the notice pay. To my surprise, for my full and final payment, they only calculated my notice pay based on Basic and HRA, not my CTC. I have other components designed to save tax, such as driver salary, medical, LTA, etc. Even if I don't submit any bills, my accrued money is made taxable and paid to me at the end of the year, deducting the applicable tax.
Questions:
1. Is my termination legal or illegal?
2. I understand Indian Employment Law allows the company to terminate employment without stating the reason only during retrenchment/bankruptcy, etc.?
3. All employees of the Banking division have resigned, and I have been terminated. Only one employee is left to head the Delhi Branch. They are looking for replacements for all the resigned/terminated employees. This activity was done to restructure the organization. Is termination without assigning a reason valid?
4. HR claimed they terminated my employment due to performance, whereas I have not been appraised for the last 14 months, and no official memo has been issued indicating my performance. Is this justified?
5. The company has not yet deposited my salary and is not releasing my salary based on the annual salary but only on Basic and HRA, resulting in a significant difference. Is this legal?
6. I understand that if the company terminates employment for reasons other than severe misconduct by me, they are liable to pay me the gratuity for the year I have served. Is my understanding correct?
7. Am I eligible for PF during the notice period by the employer, even though they made my last working day December 31st, 2008, instead of March 10th, 2008?
8. When does the termination notice period start?
a. When the company writes and dispatches the termination letter?
b. When the termination letter/correspondence reaches the employee?
In my case, the letter was dispatched on December 10th, 2008, and reached me on December 16th, 2008. The company is calculating the termination from December 10th, 2008. Is this correct, especially considering I was on sick leave?
9. What action can be taken against the company for the mental harassment I have been going through? Please advise and help.
Regards,
Renu Sharma
From India, Pune
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Questions:
1. Is my termination legal or illegal?
2. I understand Indian Employment Law allows the company to terminate employment without stating the reason only during retrenchment/bankruptcy, etc.?
3. All employees of the Banking division have resigned, and I have been terminated. Only one employee is left to head the Delhi Branch. They are looking for replacements for all the resigned/terminated employees. This activity was done to restructure the organization. Is termination without assigning a reason valid?
4. HR claimed they terminated my employment due to performance, whereas I have not been appraised for the last 14 months, and no official memo has been issued indicating my performance. Is this justified?
5. The company has not yet deposited my salary and is not releasing my salary based on the annual salary but only on Basic and HRA, resulting in a significant difference. Is this legal?
6. I understand that if the company terminates employment for reasons other than severe misconduct by me, they are liable to pay me the gratuity for the year I have served. Is my understanding correct?
7. Am I eligible for PF during the notice period by the employer, even though they made my last working day December 31st, 2008, instead of March 10th, 2008?
8. When does the termination notice period start?
a. When the company writes and dispatches the termination letter?
b. When the termination letter/correspondence reaches the employee?
In my case, the letter was dispatched on December 10th, 2008, and reached me on December 16th, 2008. The company is calculating the termination from December 10th, 2008. Is this correct, especially considering I was on sick leave?
9. What action can be taken against the company for the mental harassment I have been going through? Please advise and help.
Regards,
Renu Sharma
From India, Pune
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There are a lot of issues to be answered in a single stretch. Let me start with the legality of termination of employment. It is illegal to terminate an employee without any reason and without giving the employee an opportunity to be heard. If you have not been performing to the standards, that could have been a reason for termination. But the employer could have appraised your performance and given you an opportunity to improve. Since the employer has not taken any initiative to do so, the act of the employer terminating your service could be viewed as victimization, though the employer has every right to assess the performance of employees.
An arrangement to restructure the establishment is not a valid ground for mass retrenchment. It is like a discount sale offer by shops in view of closure for the renovation of shops. That will not be permitted at all. The employer has given you three months' salary in lieu of three months' notice. Salary for this purpose means Basic Pay and allowances (normally Dearness Allowance), and the company has given you basic salary + HRA. You cannot ask for your CTC because the CTC includes all costs relevant to your employment, and the expression CTC seldom finds any place in labor laws.
You will not be eligible for gratuity since you have not completed the required years of service, i.e., 5 years. However, whereas you have been terminated from service, you will be eligible for retrenchment compensation, which is equal to 15 days' salary for one year of service. Regarding EPF deduction, if the employee's share is deducted from the notice pay offered, the employer will also contribute. Otherwise, it is up to the employer to show cause to the EPF authorities the reasons for not deducting the contribution.
The notice period starts on the date of receipt of communication. But since the employer has paid or agreed to pay three months' pay in lieu of notice, the date does not have any significance. Here the matter becomes illegal concerning the termination of service without a valid reason. Since you have completed one year of service (which is decided based on the number of days worked, including the maternity leave days, the absence for which will not be taken as days not worked), you should have been given retrenchment compensation as per the Industrial Disputes Act. The payment in lieu of notice offered or given by the company is not questionable.
There are recourses available to employees in Labor Acts such as the Industrial Disputes Act, Payment of Wages Act, etc. But before filing a complaint against the employer, please ensure whether you come under the definition of an employee or not.
Regards, Madhu.T.K
From India, Kannur
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4526An arrangement to restructure the establishment is not a valid ground for mass retrenchment. It is like a discount sale offer by shops in view of closure for the renovation of shops. That will not be permitted at all. The employer has given you three months' salary in lieu of three months' notice. Salary for this purpose means Basic Pay and allowances (normally Dearness Allowance), and the company has given you basic salary + HRA. You cannot ask for your CTC because the CTC includes all costs relevant to your employment, and the expression CTC seldom finds any place in labor laws.
You will not be eligible for gratuity since you have not completed the required years of service, i.e., 5 years. However, whereas you have been terminated from service, you will be eligible for retrenchment compensation, which is equal to 15 days' salary for one year of service. Regarding EPF deduction, if the employee's share is deducted from the notice pay offered, the employer will also contribute. Otherwise, it is up to the employer to show cause to the EPF authorities the reasons for not deducting the contribution.
The notice period starts on the date of receipt of communication. But since the employer has paid or agreed to pay three months' pay in lieu of notice, the date does not have any significance. Here the matter becomes illegal concerning the termination of service without a valid reason. Since you have completed one year of service (which is decided based on the number of days worked, including the maternity leave days, the absence for which will not be taken as days not worked), you should have been given retrenchment compensation as per the Industrial Disputes Act. The payment in lieu of notice offered or given by the company is not questionable.
There are recourses available to employees in Labor Acts such as the Industrial Disputes Act, Payment of Wages Act, etc. But before filing a complaint against the employer, please ensure whether you come under the definition of an employee or not.
Regards, Madhu.T.K
From India, Kannur
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Dear Mr. Madhu S,
From the story, I do not think she comes under the definition of a workman as per the Industrial Dispute Act. So, how can she claim retrenchment compensation? If she is a workman, then her termination itself is illegal.
Thank you.
J. S. Malik
From India, Delhi
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From the story, I do not think she comes under the definition of a workman as per the Industrial Dispute Act. So, how can she claim retrenchment compensation? If she is a workman, then her termination itself is illegal.
Thank you.
J. S. Malik
From India, Delhi
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Dear Mr. Madhu,
Thank you for the comments. One thing to note is that the CTC for multinationals varies, especially in IT and Banking sectors. For instance, if I were offered 10 Lakhs per annum (also known as Annual Salary) + ESOP of 1 Lakh, the total CTC would be 11 Lakhs. I have the option to set my Basic salary at 6 Lakhs per annum and HRA at 4 Lakhs per annum, which would result in higher taxes.
Another option is that companies offer tax-saving components such as medical expenses, petrol bills, driver salary, professional development, telephone reimbursements, etc. These components can help reduce taxes by adjusting the Basic and HRA amounts and claiming reimbursements under a separate head (with or without bills to save tax). FBT implications apply.
In any case, the money is rightfully mine and should not be viewed as an additional benefit. Ideally, it should be given to me in full and final settlement.
Regarding ESOP + Annual salary making up my CTC, I am not necessarily claiming the ESOP value; my focus is on the Annual Salary, regardless of how it is structured to save taxes. Is my claim for the annual salary justified now?
Maternity leave was taken after completing one year, as per company policy, and the leaves were duly granted. I also received maternity expenses from the company under the plan.
Regards,
Renu
From India, Pune
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Thank you for the comments. One thing to note is that the CTC for multinationals varies, especially in IT and Banking sectors. For instance, if I were offered 10 Lakhs per annum (also known as Annual Salary) + ESOP of 1 Lakh, the total CTC would be 11 Lakhs. I have the option to set my Basic salary at 6 Lakhs per annum and HRA at 4 Lakhs per annum, which would result in higher taxes.
Another option is that companies offer tax-saving components such as medical expenses, petrol bills, driver salary, professional development, telephone reimbursements, etc. These components can help reduce taxes by adjusting the Basic and HRA amounts and claiming reimbursements under a separate head (with or without bills to save tax). FBT implications apply.
In any case, the money is rightfully mine and should not be viewed as an additional benefit. Ideally, it should be given to me in full and final settlement.
Regarding ESOP + Annual salary making up my CTC, I am not necessarily claiming the ESOP value; my focus is on the Annual Salary, regardless of how it is structured to save taxes. Is my claim for the annual salary justified now?
Maternity leave was taken after completing one year, as per company policy, and the leaves were duly granted. I also received maternity expenses from the company under the plan.
Regards,
Renu
From India, Pune
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Dear Renu,
I understand your position. But whatever I suggested was on the ground of Labour Enactment in force. Though the provision relating to salary has been diluted, considering that the wages of employees are increasing every year, the concept of employee from the angle of 'functional responsibility' is still there. As such, you seem to be out of coverage of Labour Courts, but you can file a civil suit for breach of contract. It is for you to prove and convince the court that the CTC offered is the salary. If you could do that, it would be a verdict in favor of millions of managerial employees who have this pattern of pay scale.
A scale of pay should be fixed. There cannot be any adjustment 'for the purpose of tax,' I believe. It should not be subject to change according to your option and tax burden. If so, it would be viewed as an attempt to evade tax. I believe that an employee is not supposed to declare a lower basic and higher tax-exempted earnings. HRA, for instance, shall be subject to the place of residence and rental value of residential accommodation. It should reflect at least a reasonable picture of house rent applicable in the area. These will be the apprehensions of the court while you put a claim.
All the best.
Madhu.T.K
From India, Kannur
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I understand your position. But whatever I suggested was on the ground of Labour Enactment in force. Though the provision relating to salary has been diluted, considering that the wages of employees are increasing every year, the concept of employee from the angle of 'functional responsibility' is still there. As such, you seem to be out of coverage of Labour Courts, but you can file a civil suit for breach of contract. It is for you to prove and convince the court that the CTC offered is the salary. If you could do that, it would be a verdict in favor of millions of managerial employees who have this pattern of pay scale.
A scale of pay should be fixed. There cannot be any adjustment 'for the purpose of tax,' I believe. It should not be subject to change according to your option and tax burden. If so, it would be viewed as an attempt to evade tax. I believe that an employee is not supposed to declare a lower basic and higher tax-exempted earnings. HRA, for instance, shall be subject to the place of residence and rental value of residential accommodation. It should reflect at least a reasonable picture of house rent applicable in the area. These will be the apprehensions of the court while you put a claim.
All the best.
Madhu.T.K
From India, Kannur
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