Legal Analyst, Hrm
Manager (sales Administration)
Insolvency N Gst Professional
Learning & Teaching Fellow (retired)
Ashutosh Thakre
Hr Professional

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Hi Seniors,
i have recently joined new company as HR. however the the company's MD has directed me to deduct the 5% employee salary as penalty not to complete the work within the deadline. plz guide me is this the correct policy also clarify weather it is legally valid to penalise the employee for non completion of work,
please give your valuable input in this regard,

From India, Agra
Dear Mr. Aman,
Deduction from salary as a penalty for noncompletion of work is absolutely wrong.

This type of approach can be seen between two parties who attend to each others work based on a clear-cut understanding of work which is to be completed within the time frame agreed upon and the copy of the conditions will be printed and signed by both the parties.The above approach can be deemed valid between two entities or organizations or companies who perform an activity on agreed payment terms and conditions.

The same cannot be applied on, employees. Why because, the non-performance of any employee is due to various factors. Not the employee alone. The suitable infrastructure, proper training facilities, cooperation at the workplace etc points have to be considered before penalizing any employee. I mean to say that the degree of loss is to be clearly defined before the start of the work and not after the actual loss. We should not forget that even employees are governed by various laws and a harassment case can also be registered against the company and its representatives, based on the seriousness of the case.

To put it simply, this approach is a serious dent to the image of the company in the long run and by such activities, the unprofessional way of dealings are exposed. Human resource is a valuable resource which is to be treated with utmost care and respect.


From India, Hyderabad
let me share one of the practical case of our company. one day i have send one of accountant to the bank to deposite the cheque however the accountant has mistakenly written wrong account No In cheque deposite slip hence the cheque couldn't be clear in this case the company MD directed me to deduct 5% salary of accountant. when i have tried to convince the MD saying that its not legally valid to deduct the employee the MD has said we do provide the salary to employee for the work and every employee is liable to do the correct work & must be complete within the deadline. however if any employee fail to do correct work within the deadline the employee should be penalise,
pls tell me how to deal with this sitaution,

From India, Agra
Dear Aman,
The MD seems to be having used to his orders being obeyed and he trying to bend the rules as per his vision.
Kindly brief the MD that, the company pays the salary to the employees for the work he has rendered. The Penalty cannot be put on them as, their work is depending on various factors.
Also, even if one of them approaches the Labour officer, then you are sitting on a Pandora box.
But even if he still insists to get the deduction, just to save yourself, get the same thing in writing from the MD.

From India, Mumbai
can you please provide the any relevant case law, any section etc. which state that the employee cannot be penalise,
actually when i have tried to convince the MD he said in which law it is written that the employee cannot be penalise for non completing the work within the deadline,
pls provide the any case law, relevant section for the same,

From India, Agra
Non completion of work can be due to various reasons.
Some may not be in employee control.
If an employee is habitual non performer or underperformed-counsle him,correct him,ask for explanation and still no improvement,then issue show cause notice and based on reply initiate further actions.
MD cannot just offhand or abruptly decide to cut 5% salary as penalty.
Every one has to follow laid down procedures to impose fines/punishments.

From India, Pune
Dear Aman,
From your post it is not clear to whose account the cheque was supposed to be deposited? Was the account number written clearly and given to the accountant? Have you ascertained why the mistake happened?
Our learned friends have already aired the views about the legal position. What loss was incurred due to the mistake of the accountant?
It appears from your messages that it's a small privately owned firm and the MD does not know the rules and acts based on his whims.

From United Kingdom
Dear Seniors,
it was the mistake of accountant the account number given him correctly Nirdesh was written wrongly by accountant however due to this miskate one of the creditor's cheque has been bounce. the creditor has directely ask our MD for cheque bounce. when this matter was taken up to MD the MD has immediately directed me to deduct 5% salary of accountant however accountant has also accept his mistake made by him
pls clarify in this case weather is it correct to deduct the 5% salary of accountant,

From India, Agra
Answer is no.
You cannot deduct 5% salary.
Your MD may think he is the boss-I agree -he is your boss-but he is subject to laws of the land.
Accountant can be warned or even punished for the offence.But without due process no punishment should be given.

From India, Pune
sir, pls provide the any case law, section etc. not to penalise the employee, because the MD is asking to provide the any case law, section which state that No employee can be penalise,
From India, Agra

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