Topic for Discussion - Positive and Negative Aspects of the Notice Period Clause in the Appointment Letter - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Umakanthan53
Labour Law & Hr Consultant
V.Raghunathan
Process Industry Consultant / Soft Skill
Tsivasankaran
Consultant

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Dear members,
On one of the WA groups of HR, Administrator of the groups has raised a topic for discussion. Today's topic is on "Positive and Negative Aspects of the Notice Period Clause in the Appointment Letter". He has asked the following questions:
Is the clause of notice period in the appointment letter used arbitrarily or judiciously?
Is the clause of notice period used as a weapon for holding relieving letter, experience letter and F&F settlement or vendetta at play if the employee fails to serve the same partially or completely (except in abandoned cases) to the company?
Is it not the truth that the clause of notice period is misused under the pretext of redundancy by the company for terminating services of employee with immediate effect by paying salary in lieu of notice period?
Is the clause of notice period used for the convenience of the company even if it is not required in some cases?
I have given the replies to the above questions and these are below:
+++++
Dear Rajaram,
Replies to your questions are as below:
Q. 1 Is the clause of notice period in the appointment letter used arbitrarily or judiciously?
Reply: - Judiciousness or arbitrariness is a matter of interpretation. To know whether the use of judicious or arbitrary, we need to know the terms mentioned in the appoint letter.
Those who started their career in mid-nineties or earlier, will remember that the concept of notice period was reserved only for the managers. Junior level employees could quit the company with just few days notice. However, in the post-liberalisation era, business started growing and it also created the scarcity of the talent. To tide over the talent shortage, companies started increasing notice period. Earlier it was 30 days, then it was 60 days and now in most of the companies it is 90 days. This long notice period gives elbow room to the current employer not just to search better candidate but to manoeuvre in order to retain an exiting employee. They may promise increase in pay or promotion or additional perks.
Q. 2 Is the clause of notice period used as a weapon for holding relieving letter, experience letter and F&F settlement or vendetta at play if the employee fails to serve the same partially or completely (except in abandoned cases) to the company?
Reply: - Appointment Letter is a contract between the employer and and employee. Both the sides must abide with the terms mentioned in the appointment letter. Now what if employees abandons the duties at his/her will? It upsets the operations of the company. To tide over this capriciousness, companies hold the F & F. It need not be construed as vendetta but it is an action to maintain culture of discipline in the company. By withholding F & F, companies send a signal to other employees that what fate they can meet if they abandon their job whimsically. Yes this is a weapon, nevertheless, it has to be used only against defaulters. It's misuse could boom rang on the company.
Q. 3 Is it not the truth that the clause of notice period is misused under the pretext of redundancy by the company for terminating services of employee with immediate effect by paying salary in lieu of notice period?
Reply: - Modern businesses are different than the businesses of the 20th century. In many companies the work is project based. Now what if the project is completed and the employees who worked in the project could not be absorbed in some other job? What to do in this case? If they allowed to continue their employment without significant work, then the company will turn from business organisation to a charity organisation. To sustain competition, company has to retain only the relevant and exact manpower. To get rid of the excess flab, companies use the clause of the notice period.
Q. 4 Is the clause of notice period used for the convenience of the company even if it is not required in some cases?
Reply: - There is a skill shortage at all the levels. There is a shortage of right talent at all the levels. Against this backdrop, which are the designations that do not require notice period? It is not easy to get even quick replacement of office boy! Therefore, there is no question of removing clause of notice period. Notice period is *fait accompli* and it is going to stay till a situation arises where innumerable candidates chase far fewer jobs!
Final comments: - While designing the exit clauses, employers should take note that these are equal for both the sides. The contract should not be tilted towards them. Secondly, in many companies there are long-serving employees. When they had joined some 20-25 years ago, the notice period was just 15 days. Now the current trend demands notice period of 90 days. Many companies have started extending the notice period. However, changing the conditions of employment somewhere in between is illegal. There is a ruling to this effect by the Delhi High Court.
Thanks,
Dinesh Divekar
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Like in any other contract under the Law of Contracts, the clause relating to notice period in a contract of employment is a restrictive clause of foreclosure of the contract by either of the parties to the contract as agreed earlier. Therefore, the notice clause, per se can not be termed as arbitrary. Like Mr Dinesh said it can be used arbitrarily by any one of the parties that could only be a matter of interpretation depending on the context. If any employer realizes and recognizes the fact that employment is not a life-time contract and the notice clause is only a formal prelude to the foreclosure of the contract of employment by the employee, certainly he would not harp merely on the letter of the clause. Similarly, if the employee realizes employment ethics behind the notice clause, he would take all the precautions to comply with it fully. Regarding abscondence by the employee or disguised misuse of the notice clause by the employer, there are legal consequences to be faced by the violator.
I would like to reply with my views, point-wise in the same order.
1.0 The spirit of such a clause is for mutual convenience. Wherever a healthy relationship
has prevailed, there has been no problem.
2.0 If the notice period clause is used as a weapon, then it reflects on the poor attitude of the Management.
3.0 A salary paid in lieu of notice period is welcome and in most cases it is part of Appointment order.Sending some one out unceremoniously without any monetary compensation is harsh and unethical. This aspect is a two way process.Sometimes the management accepts money in lieu of serving period either in full or part.This also is a part of appointment order. A prevalent practice.
4.0 Within the permissible conditions of employment, management can take its time to relieve.
V.Raghunathan
Chennai
Notice Period per se is a recognised term of employment. No one questions . But there are some practical issues which are grey and need to be clarified.
1. What is the meaning of 30 days or 60 days or 90 days? does it mean working days or does that mean actual days? In my view it implies actual days and does not mean only working days. Many queries keep coming on this issue. Earlier days, we used to mention one month or two months or three months and for calculation we take all Sundays and Holidays falling in between.
2. Can an employee avail leave during the Notice Period? Mny small organisations refuse leave during Notice Period. an employee continues to be an employee during the Notice Period and if he has leave, he has a right to avail. Rejecting leave based on the context that he is in Notice Period is not correct.
3. What is the meaning of pay in lieu of Notice Period? Does it include only Basic plus DA or does it include all allowances? Point to be debated. But i am of the view that only Basic plus DAalone should be considered. I advise my clients to specify this in the appointment letter itself to avoid ambiguity.
4. What do we do if we ask an employee to quit immediately?In my opinion...I also practiced it ...the employee will be given pay in lieu of Noyice Period even though on paper it will appear Resignation and not termination.
5. Can the Management relieve an employee even before he or she completes Notice Period? Manyemployees call me and ask this doubt. Notice period is contemplated to give notice to make alternative arrangment. In my view he or she can be relieved and there is no need to pay for the balance of notice period.
Thanks
T Sivasankaran
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