Dinesh Divekar
Business Mentor, Consultant And Trainer
Lavika Yadav
Insolvency N Gst Professional

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If a reputed startup, aiming to be big in near future is facing cash crunch and is unable to pay salaries on time (7th of every month as promised to employees, but not present on appointment letter), also has a one year contract signed and only after one year completion, employee can leave with a notice period of 3 months (negotiable on mutual agreement). four to five employees have left the company without any notice period or proper resignation acceptance (that too within contract period) and threatening on terms of delay of salaries -to gain a relieving letter / or last month salary which has been put on hold on account of absconding.

What should the company do in such a scenario. The company doesn't want to gain anything from these employees but wants to set an example that following company policies are important. and Serving notice or buying it out is the only want to leave the company peacefully.

Additional Information: These employees also did not achieve their target and hence their salary was delayed as they were responsible to bring revenue to the company. However after reading various other threads it is understood that target related terms are required to be in appointment letter, but the company did not have these terms of target, but only generic performance.

Does violating verbal terms of salary disbursal (unintentionally) on company's part can be nullify the contract and give employees a chance to threaten the company for getting everything they want on their terms and conditions?

From India, Vadodara
Dear AvantgardeHR,

Whether you are start up or a old company, labour laws remain. As per the Payment of Wages Act, you are supposed to pay the salary by 7th of the subsequent month. You have defaulted on that count.

Your owner has cleverly inserted the clauses in the appointment letter related to the notice period or lock-in period in the company. Nevertheless, did not serve the purposes owing to non-payment of wages

Above all, you are laying blame of delay in disbursement of salary to the non-fulfilment of the targets by certain employees. This is not acceptable. You cannot hold to ransom all the staff because of the under-performance of few employees. Your owner should have kept sufficient cash reserve to meet the exigency.

Now you want employees to show commitment to your organisation by way of fulfilling the verbal agreement of serving three months notice period. My dear friend, commitment is not one-way street. If your owner remains committed to the employees then only they will show reverse commitment.

Your worst trouble might occur if some employee complains to the labour office about non-payment of wages. Generally labour officers take stern view of these things. Caution your business owner on this count.

it is high time for the owner of your company to get his act together by infusing capital through some VC. These teething troubles are common in the start up companies. His leadership lies in overcoming them.


Dinesh Divekar

From India, Bangalore
Thanks Mr. Divekar for the detailed response.
It would be great if you could throw some light on what kind of penalty can be charged for such matters reported in the court by an employee who has resigned with out completing contract period or without serving any notice period.
In addition this particular employee is also harassing to receive documents like relieving letter on the grounds of delayed salaries.

From India, Vadodara
Dear AvantgardeHR,

It appears that you have not understood the essence of my past post. Leit motif of your post is how to teach a lesson to absconding employee rather than looking at the serious organisational issues. If your priority is to take on the employee who exited without completing the notice period, then hire the lawyer and ensure that court sends the summons to the employee. Further law will take its own course. Court cases drag for very long period. Therefore, please check whether is it a case worth fighting for.

From the management science standpoint, what is happening in your company is crisis of confidence. This is far more serious matter. Why employees start quitting even without notice period? They do it when they lose confidence on their employer. Those who left without serving notice period, have shown explicitly the loss of confidence. But then what about those who are with you? Are you sure that they are giving their best? Are they well-motivated, even without getting their monthly remuneration? What kind of organisation culture are you building in the company? Will it foster your growth or hinder it?

Human are important asset of the organisation. If you nurture them, if you grow them, you will be able to grow your organisation. On the contrary, what your employer is enjoying is slackness of the labour laws in India. Another advantage for the employers in India is rickety judicial system. Armed with both the advantages what owner wants is to turn employees into slaves. Worst still to ensure that the employees remain with you, you have kept in your custody their education certificates as well. Asking for the education certificate is causing “harassment” to you but then non-payment of wages is cannot be “harassment” to the employees!

It appears that Vijay Mallaya is role model of your business owner. Vijay Mallaya could get away even without paying penny to the thousands employees Kingfisher Airlines. Earlier he was called “King of Good Times”. Good times or bad times, he continues to behave like a king. Nevertheless, he had/has political connections across the party lines. These connections helped him in preventing crumbling of his kingdom. But then everybody is not fated to be Vijay Mallaya, that is what irony of the life is!


Dinesh Divekar

From India, Bangalore
Mr. Dinesh Divekar, seems like you have not read the case properly. 'UNINTENTIONAL' and 'DELAY' are the words used. It's not that renumeration is not being paid at all. Also, if the slackness was to be enjoyed, many people come to us for interviews who have not been paid for 6 month. While people like you like to jump to conclusions without knowing exact story and curse the owner/employer. This medium is created to gain help and we are not doing anything unethical. And yes while 20% of employees have left due to probably losing confidence but they lost confidence in the first place because probably they deserved to be where they are. As a matter of fact most of them are unemployed till date. And 80% of them who are staying are stronger and supporting the organzation in both ups and downs, as they feel part of the family.
So before raising a question on culture and using strong examples, please mind your assumptions.

From India, Vadodara
Dear AvantgardeHR,

Well gentleman I standby what I have written in my post. [I]There is no assumption to speak of. All the deductions are made based on the facts that you have provided in your posts'/I].

On the one hand you violate Payment of Wages Act (or Shops and Establishment Act or Factory Act as the case may be) by not paying wages to your employees and yet you say "This medium is created to gain help and we are not doing anything unethical". If violation of law is not unethical then what is the definition of the ethics or what is the definition of law that also you could have explained. Going further may I remind you that no law differentiates between "intentional" and "unintentional" violation?

This is forum is for helping those who follow the law and not those transgress or bypass it.

One more statement in your post reads "many people come to us for interviews who have not been paid for 6 months". Yes, this happens in India and blatant violation of labour laws is so common that law has lost its quintessence. As written in previous post, Dr Vijay Mallya has left behind his miniatures to continue his legacy. This forum is replete with the posts of how employers violate the law. This has been going on and will go on, thanks to the weak redressal mechanism.

Members of this forum take neutral position. Neither we can take side of the employees nor the employers. We are a third party and what goes on in your company is your personal matter. But once it comes to the public forum, members are bound to assess it dispassionately and not in the manner that pleases you. Therefore, before calling names, gentleman touch upon your gumption. That is the need of the hour!


Dinesh Divekar

From India, Bangalore
""If a reputed startup, aiming to be big in near future is facing cash crunch and is unable to pay salaries on time (7th of every month as promised to employees, but not present on appointment letter), also has a one year contract signed and only after one year completion, employee can leave with a notice period of 3 months ""

Company is reputed for what?

Unable to pay staff intake--in such crisis,employee should be taken in confidence and briefed about problems and what action company is taking to sort/face/come out of cash crunch.

It is a statutory requirement to pay wages in time.(whether it is mentioned in contract or not)

Contact of one year minimum service is not a legal clause.

""These employees also did not achieve their target and hence their salary was delayed as they were responsible to bring revenue to the company. ""

You cannot stop salary if a person fails to bring in revenue for the company.Again action of stopping salary is not in consonance with law.

Normally a variable portion of salary is fixed which varies with sales/targets.

When company fails to pay salary you expect employees to keep working without pay.

The company knows it is facing a crunch,this is the time senior management comes out openly and infuses confidence to employees who may not know the full picture and will be hearing news on company grape vine.

Any employee who asks for his entitlement as per contract is perfectly within his rights.How can it be termed harassment??

Kindly review the whole problem in different light,confide in remaining employees and show them what your company is doing to come out of the problem.

From India, Pune
Firstly you said unintentional,later on you are saying salary delayed for non achievement of targets and poor performance.Did you mention in appointment that you will hold salary in case of a person doesnt achieve targets.
Secondly employment bond is not valid in law and such a long notice period is totally biased decision.
I dont know why people try to run company on their own terms and make such silly policies which is only beneficial for the employer and later on harras the people and expect loyality from them
Yes Mr. if you can put salary on hold "unintentionally " employee can also go legal against you " intentionally "
So if you are pursuing your dreams to develop into a big company then please watch your actions and act wisely.
Best of Luck !!!

From India, Mohali
Penalty at thefirst instance fine which shall not be less than one thousand five hundred rupees
but which may extend to seven thousand five hundred rupees...repeat offence....imprisonment of upto 6 months along with fine....

From India, Jamshedpur
facts are not clear.but..if you really want to make an example out of the employees .You can with hold their salary POSITION OF LAW is..when an employee tenders his resignation without serving upon his employer advance notice of his intention to resign prior to the date when prescribed notice period applicable to his post starts running against him or leaves the service of his employer without tendering any resignation at all, then the salary of such an employee for the notice period is liable to be deducted in lieu of service of advance notice of intention to resign......but still would invite the penalty under the PoW act..which is maximum of 7500....so..withold...in this case..and inthe future...take a guarantee or deposit equivalent to three months pay
From India, Jamshedpur

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