Urgent: Variable PayOut In IT Comp(Paid If Employee Is On Payroll On Date Of Payment) - CiteHR
Tsivasankaran
Consultant
Rajanassociates
Legal Counsel
Rvdilip
Finance & Accounts, Vc & Pe
Sreedhar Reddy M
Software Tech Manager
Simplygaurav5
Software Engineer
Archi14441
Sr. Developer
+4 Others

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I have one query. I searched entire google but not found a single answer for that.

This might help lakhs of our IT employees group as this is very unique and crucial query.

In indian IT companies which follows Fixed + Variable pay. The structure is OK.

But the problem is when the companies say that the Variable pay will be paid only if the employee is on companies roll on the "Date of payment of the variable pay"... Most of the companies pay it annualy.

Due to this companies saves crores of rupees and employees looses the same, every year.

Employee works so hard all time and looses the big amount of variable pay as an indirect compensation for his/her resignation from company.
For example if in a financial year an employee is Relieved say a Month or a week before the variable payout date at the end of the year, then he/she is not even paid for the 11 month... even if the ratings of that employee are good... even if the last working day of employee is 1-2 days before payment of variable pay then also he/she is not paid that....

So is this logically and legally correct? Hard work is nothing? Company can make rules which just give benefits to the company alone? Compant says that the offer letter mentioned the rule.. and employee signed the offer...

This is wrong... the employee should get the Proprtionate variable pay whether he/she is on roll or not on the variable payment date.

Does signing offer which states this, so will that written on offer makes it legal?
I don't think that just signing offer makes everything written in offer legal viable and true... if this was the case then there will be no court cases at all.

I wanted to know what can be the stand as per indian laws like industrial dispute act, wages atc etc... and is there any case like filed or decided in any court of india?

Please give your opinion and reference of any section of any relevant laws of india which applies to this.

Many companies use variable pay not only to incentivise employees for good performance but also as a retention tool. If employees resign and go, then it defeats the purpose / intention of the company which offers variable pay. To that extent, not paying for employees who quit before the relevant date is understandable as long as it has been disclosed upfront and the employee has accepted the same. Alternatively, if it is part of the official HR policy which is disclosed & accepted by the employee, then also it is acceptable. One way by which employee can avoid this situation is to be there till the payment date.
Dear Dilip,

Thanks for your prompt reply. I know why companies do it. But my query is it is legally not stand able. And one thing specially I want to mention is that just being a company policy or rule and being on offer which is signed by employee Doesn't make all things legal. Even in both parties signed offers and even if it is companyís policy cannot make 'One sided Benefit' or other void things legal.
For example many companies have "Salary Freezing" company policy & rule and also mentioned in offer letter which is signed by employee and even notified by companies by corporate mails before freezing - all these donít makes freezing salary legal in India. All these things are overridden by the Industrial dispute Act, Wages act and other relevant acts of India... same way if company policy says that they donít give service certificate if employee absconds or goes away on bad note and even same is mentioned in both parties signed offer letter, then also as per higher acts and rules of Government of India - which overrides and make mandatory for the company to provide the service certificate in any case to the employee whether absconded or relieved properly doesnít makes difference.

So my question is not Why companies have variable pay.. I know... I am asking legal it can be challenged or not. I think it is legally void as it gives benefit only to company and logically also it is unfit policy.

I agree with Dilip. My dear friend, in your query, you keep saying legal system in India and also mention Industrial Disputes Act and Wages Act. There is nothing known as Wages Act in India and when you specify law, kindly mention the name and provisions correctly.

I keep mentioning in many posts in cite HR that employment terms in any organisation are guided by

1. Contract/Individual contract

2. Legislations.

You have raised two questions.

1. Variable Pay Can this paid only to employees on the rolls as on the date of Payment

2. Freezing of salary

Variable Pay

If there is a mention in the offer letter and any subsequent policy declaration that such payments shall be made only to those employees who are on the rolls of the company, it is absolutely legal to enforce and an employee who has left can not make any claim. Noone has tested in the court whether the siftware engineers and other hardware engineers are workmen under the Industrial Disputes Act. Even assuming that they fall under the definition of workmen under the ID Act, they maqy not be eligible for Bonus under the pyament of Bonus Act as the salary limit under the Payment of Bonus Act u8s Rs 10000. Even assuming some empliyees get lesser than Rs 10000, then they are eligible for Bonus calculated at Rs 3500 for the previouys year. Other payments are guided by settlements on in dividual contracts. I have signed many settlements under ID ACt for Payment of exgratia only for employees who are on the rolls of the company as on date of Payment. And such settlements were signed before conciliation officer under sec 12(3) hence absolutely legal.

Hence such practices on Variable Pay are absolutely within the legal framework in India

Freezing of Salary

I do not understand as to where you get the idea that Indian legal system does not allow freezing of Salaries.

When you talk about frezzing, I presume that you are mentioning about NO INCREMENT situation.

If there is a mention in your appointment letter about scale of pay, then you are entitled to Increments as mentioned in your letter. Legally you are not eligible for anything more. It is only based on market conditions, Organisations effect salary revisions. Even in case of workmen under the ID Act, Management can giv e Notice under Section 9 for freezing salaries. Ofcourse one need to discuss the issue before Concilliation officer before doing the same. But in respect of others who are not workmen, there is no law which says that organisations need to revise salaries ever year.

It is definitely not one sided. As for as variable pay is concerned the employee has to fulfill the condition os staying with the company on the date of Payment and the employeer has to fulfill the condition of making the payment. There is nothing one sided in this contract as both conditions can be complied with.\

I hope I have thrown some light on the question raised

T Sivasankaran

Hi,
I am also victim of this fraud. This fraud has been made by very big corporate house who shows as only they are having the best HR policies. It is neither mentioned any where nor told to employees that "To get variable one has to be on active payroll on the day variable declaration". HR keep on saying to all employees that one will get his\her variable along with other employees. Now when I enquired with then they are saying that company has decided not to pay the variable which is perfonace linked as per appointment letter to ex employees. They are not even releasing the variable for the year 2008-2009 also.
I am planning to put a case in civil court under breach of contract & fraud.
This Group is ESSAR...(Essar information technology limited)
Regds

Hi All,
I have an issue regarding the same. I worked for an organization. In that organization, the variable pay period is every six months. I completed that six months period And they announced the variable pay for Jan-June. But, they are saying we considered Jul-Sep quarter and giving variable pay for Jan-June. I spoke to them. They said that they wont give variable pay for Jan-June as they are considering Jul-Sep quarter. My last working day was in August
So, Any one clarify that, am i eligible for variable pay or not?

Dear

In India the classification is two fold.Workman and Supervisory or Managerial Staff .This "Variable pay forfeit" takes place for Supervisory or Managerial Staff as for the workman Payment of Wages Act will apply.Such non payment can be construed as deduction in Pay.

In the IT Industry everything is in the inception stage without any Organized group monitoring all your allegations.Until the Govt interferes and sets up a Redressal Mechanism for the IT Industry all such infractions will continue.

In case you can prove that you are a workman not doing any Supervisory or Managerial work you can still file a complaint with the Payment of Wages Authority.Fearing a fall out the Management may pay up.But you can also expect them to put up a Big fight.Going to a Civil Court will be necessary if you do not come within the definition of workmen.Consult a Local Lawyer .

With Regards

Advocates & Notaries

E-mail : rajanassociates@eth,net,

-9025792684-9025792634

Hi,
All these details looks okay. But my situation is little different.
In My office Variable Pay period is Apr to Mar. That is Apr-2013 to Mar-2014. I am still in the office but HR( Company Management ) is delaying the VP announcement. I may get relieve by 31-May-2014. if there are delaying then how can I proceed in my situation.
Please let me know, If I can do anything here or how to proceed regarding VP.
Warm Regards,
Sreedhar

Hello everyone,
I am in the same situation as was Kailashrathi few years back. I just need to know if someone has ever tried it legally. I work for a firm where variable pay is paid annually for Jan-Dec(2014) with the next year's February(2015) salary. But my last working day is Jan 27th 2015. Is there any way that i can get the variable pay. Has anyone contested this situation legally.
Thanks,
Gaurav

One more thing, why should these firms get benefited with the employee's money(not paying variable pay) and mark them as revenue. Does'nt it look like some kind of a fraud? Signing the offer letter means everything is legal? When the firms can decide their own payout cycles, payout percentages, payout dates then how are these things regulated? Which laws govern this kind of fraud. Don't you think the firms are making a hell lot of money by seizing these variable pays for each and every employee leaving the respective firms. Why should'nt this money be counted as fraud money. If the employee is working for 11 months, variable for 11 months should be paid to the employee.This is what is correct ethically. Please share if you have a different reason other than signing the offer letter obligation or retaining the employee argument. If an employee needs to be retained, provide them the best in class working environment, don't eat their money for which they should be paid for. Variable payout is the right of the employee, its part of the CTC. Employees are not supposed to feel obliged about the payout, it's their money.

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