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Hi all,
I need one help / advice. We have a start up Company. We noticed that people leave the organization without serving the notice. To retain the employee we have added the Retention bonus in the CTC, but it doesn't work. We have put the retention bonus as one component in monthly salary structure and deducting some amount from the gross salary.
Ex : 20000 is the salary so we are paying 19000 and one thousand is showing under deduction. Which will be paid after an year including same amount from employer as well
So the total Retention bonus will be 24000 on completion of year.
Will it be fine or there will be some legal issue?
Please suggest.

There will be no legal issue if both parties ( Employer and employee) agrees, only request is make a proper agreement with clear conditions and same communicated to employees also.
Dear Jugnu.

No legally you cannot hold any part of wages/salary earned by workers/employees just to retain the weokers/employees in the service. It is not the statutory component however as per payment of wages act. Entire wages/salary should be paid earned by employee within the 7 days after completion of month if employees strength is below 1000 and if employees strength is 1000 or above the salary should be paid on 10 days or before after completion of month. Also for existing employees this component may be cause of dispute as per sec 9A of ID act. As it is change in service condition. Therefore putting such component is not legally valid. First you need to figure out that why employees are not being retain in thier service longly there must be any reason for the same. In case if any employee/workers leave the job without serving notice period then you can demand the money in lieu of notice period as stated in your offer letter/certified standing order also you can stop his/her Full & final settlement. Always do remember employees are free to work anywhere after providing notice period & completed the period of notice No employer can force any employee to retain in the service by executing service bond & deducting the some part of employees salary hence such component cannot be legally stand,

Thanks & Regards

Devesh Chauhan

Practicing in Accounts, Finance, Taxation & Labour Laws

Dear Mr Jugnu
PFA copy of sub-section 6 of Section 1 of Payment of Wages Act 1936 as per which the Act is applicable only for persons employed and getting wages upto Rs 10,000/= (not sure about latest amendment).Therefore try to retain good employees by your innovative methods and systems.
N Nataraajhan, Sakthi Management Services (Hp:+919483517402;

Attached Files
File Type: doc Payment of Wages Act 1936.doc (6.5 KB, 90 views)

Dear Jugnu,
First of all you need to find out the reasons behind employees leaving the organization and not sticking to their jobs. Of course you have a remedy if they leave you without giving notice or pay in lieu thereof as there always exist a clause or condition in their appointment letter. I agree with Sh Devesh Chauhan that such deduction shall not be in order. Such deduction shall also violates the provisions of Payment of Wages Act,1936 as it shall be taken as illegal deduction under the Act. You can add anything from your side to motivate the employees but can't deduct from their salary without their written consent.
You can make a questionnaire and take a feedback from the employees leaving the organization about their liking and disliking of the organization and suggestions for improving the work environment.
BS Kalsi,
Member since August, 2011

Dear Jugnu,
You have option of showing @24K as bonus in his CTC payable - end of calendar/financial year and show his salary as 19K. By this way you do not dishonor any act. (if employee agrees).
Secondly, You can hold employees F&F settlement until completion of notice period or the salary for the notice period as mentioned in the appointment letter. In case you have such trend in your organization make sure, you increase notice period to control it slightly. Strictly follow the notice period clause of appointment.
Secondly, by this, you are not addressing the root-cause. Have a proper "Employee-Engagement-Survey" which will cost you hardly anything and reach to the actual cause of employees leaving you. If that is addressed perfectly and taken correct preventive actions, you will not require to seek such loopholes. Consider 10% of disengaged employees anytime in the org but it will work 90% of remaining.

Dear Jugnu,
Instead of recovering Rs.1000/month, if you pay company's share Rs.1000 x12=Rs.12000/ on completionof a year as adhoc (not as retention allowance) I think this supports a good will gesture and employees will like it also.
The problem of attrition should be analysed and corrected , like other members emphasized as above.
While, recovery from monthly dues is not legally correct, instead you should find a permanent solutions to your attrition based on diagnostic study.
RDS Yadav
Labour Law Advisor

On the same topicwe have framed a RETENTION BONUS Policy.which we want to start from 1/4/2019.forE retain the employee for atleast 3 yrs.Fresh Trainee engg.Diploma or
graduate Engg.we would like to add Rs.3000/- in his salary every month and dection for the same amount as R.B.(retention Bonus) 7 Rs 1,08,000/-(3000X36 =1.08,000)
will be paid after three yrs.till that period we will keep aside aa a R.B.If he leave within three yrs then this amount he has to forfitted.
We want the legal staues on this R.B. whether we can or not?or in other name we can do this.As we are showinf his pay slip as R.B.
e.g.We are giving Tr,Engg.Rs.11,500/-p.m. as a gross sal.deduction will be of P.F./E.S.I./P.T.but we will not show any deduction on R.B.-Rs.3000/-
what heading we can give if R.B. is not legal?
suggeastion from Higher committee of CITEHR.
can you help me.This policy is not for exp.emploees.only for the my comp is a channel partner of international comp.Trainee get good training being the channel
Partner of International comp.So they try to leave the job within a year or Two.? and hence this policy.
Jayant Nisal


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