Is It Legal for Companies to Withhold Variable Pay if You Quit Mid-Term? What Should I Do?

Hi All,

I have been associated with a company for the past 1 year and 6 months. 20% of my CTC is a variable pay that would be paid at the end of 1 year. I have heard from my seniors who have left the company that the variable pay was not paid during the F&F settlement procedure.

Is it legal not to pay the variable part of the salary if the employee quits mid-term after serving the notice period?

What is the procedure that I have to adopt if the company does not pay the variable part of my salary when I leave?

Regards,
Vijay

Hi Vijay,

It depends on company policy. If you are aware of the company policies, it will be clear to you. Company policies vary from one company to another. If there is no policy regarding the claim of that amount, you are eligible to claim it; otherwise, it is not possible.

With regards,
Ramesh

Hi... Variable pay is a component that is to be paid based on performance. As per the respective company policy, it may be paid only based on individual performance, or on individual and company performance. In normal circumstances, performance is measured annually.

When an employee leaves mid-year or mid-way, although he/she may claim his/her variable part, if the company's PMS policy states that variable pay will be paid only on completion of 12 months or a minimum duration of 6 months/9 months, then it has to be followed. If there are no clear guidelines, one may get oneself appraised during the time of leaving and get paid on a pro-rata basis.

There is no compulsion on the company to pay variable pay. However, technically, one may surely claim his/her variable part as it is a part of TCTC, but still, considering the nature of being variable and to be paid based on appraisal, it is solely a personal decision.

Cheers,
K

Hi Vijay,

In case you are referring to your variable pay for the first year, which you have already completed (since you said you have completed 1 year and 6 months), you may claim the variable pay. However, if you check your offer letter or letter of appraisal, it would mention the terms of payment for your variable pay - like on completion of probation; on completion of a particular period of time; on completion of appraisal, etc., as well as terms like - based on performance of the individual/company, etc. Hence, the payment is subject to all these conditions, and there is no liability on the company to pay it otherwise, though they may decide to pay the same on a pro-rata basis - which is totally dependent on the company.

Thank you all.

I checked my offer letter, and there is no mention of the payout of variable pay at the time of leaving. However, I have checked with other senior employees who have left the organization, and the company has rejected their request to clear their variable pay.

Regards, Vijay