We are msme. can we employ any office or production staff on fixed time employment for two years period. can we hold part of his salary as security deposit for contract period. Is it permissible under state govt laws?
From India, undefined
Labour Law & Hr Consultant
Hr Consultant

No. You cannot hold part of the salary towards security deposit; rather you can require the employee to deposit a reasonable fixed sum as security deposit as a precondition for joining the services.
From India, Salem
Dear Umakanthan
If company ask for some security deposit for two year. So at the time of separation of employee, will employer pay the interest on the amount deposited by the employee as preconditions of joining the services?
Moreover will it be a fair practice to get security deposit from the employee, how employer will account it in his books?
Kindly through some light on it.
HR Revolution Services

From India, New Delhi
Dear friend from HR Revolution Services,

To my knowledge there is no legal bar in collection of security deposit from employees, if the nature of job requires handling of cash and other valuables in the business transactions of the organization. Therefore, the fairness of such a practice depends entirely upon the nature of the responsibilities of the job position. Certainly, it will be mandatory to pay interest normally at current bank rate when the contract comes to end.

In case of companies registered under the Companies Act,2013, if I remember correct, the collection of of security deposit is permissible under rule 2(1)(c)(x) of the Rules,2014. But it shall be non-interest bearing deposit not exceeding the concerned employee's annual salary. For further clarification you may please refer to the Companies { Acceptance of Deposits) Rules,2014.

Coming to the present thread, if the intended security deposit is purely for the purpose of compelling the FTC employee to serve the entire tenure of the contract, I think it will not be fair and also it would be an illegal deduction from salary under the PWAct,1936 and the Code on Wages,2019.

From India, Salem
Thanks Mr. Umakanthan........:-)
Still there is difference between the term specified under rule 2(1)(c)(x) is "Member" & in present thread is concerned about the FTC - of Production Staff.
So as per my knowledge (may be wrong or incomplete) this clause will not be applicable to the person(s) who are in the contract of Employer & Employee relation for fixed tenure.
Instead of security deposit, they can sign bond with the employee.
HR Revolution Services

From India, New Delhi
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