Can a Company Delay Notice Pay Until the End of the Notice Period? Seeking Insights

Hi all,

If somebody's services are being terminated by the company and as per the terms and conditions of the Appointment Letter there is a notice period of three months. In lieu of this notice period, the company should pay three months' salary to the employee. Now, I would like to know, is it possible for the company to ask the employee to stay at home and receive their notice pay after three months only? In my opinion, it should be paid to the employee on the expiry of the second working day from the day on which their services were terminated or on a monthly basis.

Please comment.

Why do you want to continue to show such an employee on your company's rolls anymore? It's of no use.

It would be wise to discontinue your association with him by paying off the required notice period as soon as possible.

Amit

Amit,

No, it's the other way around. A company has asked one of my friends to sit at home, and they will pay him after three months. Is there any law on this?

Thank you.

Hi all,

There is no point in asking an employee to sit at home and pay the notice period. It would be better to terminate him on the first day itself by giving him the notice period. That is the usual practice; otherwise, he may cause some unwanted issues as he is on the payroll for that period. He could also get involved in trade union activities as long as he is not terminated from the services.

Hi,

It is always better to pay off and settle the issue once the company has decided that the employee should not serve the notice period. It does not serve any purpose. Either you ask the employee to attend the office during the notice period and upon expiry of the notice period relieve him, but keeping things pending does more harm than good.

Best regards,
Daleep K Parimoo

Dear Subhash,

On the company's decision to terminate an employee, only the following two options are advisable:

1. To release him on day 1 with 3 months' notice pay.
2. Employee can take PL (whatever is the balance in the employee's account), and post which notice pay can be given.

In both cases, notice pay is for 3 months only. However, in the second option, the employee can be continued on the company's roll for an extended period.

Hope this is of some help.

Thanks & Regards,

Shobha Pandey

Hi all,

Is it necessary to pay notice pay to the employee who is terminated by the company? Please comment.

Ali

Hello,

This is all governed by the company-certified HR manual, terms and conditions of the appointment order, or existing model/certified standing order. Whether the condition of compulsory leave exists in any of the above, only in that condition are you at liberty to do so. Otherwise, you are bound to pay the compensation as per the terms and conditions by terminating the services after imparting a fair and proper domestic enquiry. If there is any proceeding going on in court in accordance with the ID act, then you have to take the permission of the Labour Court as well.

Thanks,
Ajay Morolia

Hello,

I believe that he is entitled to receive compensation as per the terms and conditions of the Appointment Letter/Standing Order. Termination of service can only be done after holding a fair domestic enquiry. In the absence of this, the employer should be prepared to face a trial under the ID Act 1947, under section 25F, for retrenchment.

Thanks,
Ajay Morolia

Dear Friend,

Yes, if the company terminates the services of an employee, then the company is liable to pay notice pay as per the terms and conditions of the appointment letter.

Regds,
Abhishek

There are several spelling, grammar, and punctuation errors in your text. Here is the corrected version:

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But nowhere is it written in the Appointment Letter when the Company should pay the notice pay upon termination. It is stated that in the event the Company terminates the services of the employee, the employee should be paid 3 months' notice pay, or vice versa.

Is there any law dictating when the full and final settlement should be made for a terminated employee? As far as I can recall from my past readings, it should be settled within 24 hours of the termination of the employee's services.

Please give your valuable comments.

Regards,
Subhash

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I have corrected the spelling, grammar, and punctuation errors in your text. Additionally, I have ensured proper paragraph formatting and maintained the original meaning and tone of your message. Let me know if you need any further assistance.

Hi Subhash,

You are right. I don't see any reason for paying the employee after 3 months.

Regards,
Sujata

It is not correct to ask the employee to sit at home and pay him the salary. It is better to get rid of him by paying or adjusting the necessary dues to/from the company. But, yes, we have to pay him the notice pay if the letter of offer states so.

Regards,

Sathyamoorthy Iyer

Hi Subash,

According to me, the payment should be made one time and at the earliest possible time from the time of termination. However, it's left to the company to decide the earliest time for this settlement, as a non-productive employee is always unfavorable in the working environment. As indicated by others, this can be harmful as well. Hence, check for the paid and statutory leave or any dues liable so that the employee can be taken off the rolls.

Regards,
Abhi

Dear Subhash,

The exact clause of termination is either 3 months' notice or payment in lieu of notice. For example, if a company wants to terminate an employee from 1st March, 2000, then the notice must be served by 1st December, 1999. If the company gives notice after that date, they must compensate the employee with the shortfall of the notice period by pay.

So, if the notice is served on 1st January, 2000, then the employee must be paid one month's salary to compensate for the shortfall in the notice period of one month.

Hence, in your case, the company can issue such a notice and make the employee sit at home while continuing to pay his salary. The only legal requirement is that the employee must be deemed present, and his physical absence from the office must not be adjusted with his earned leave balance.

For example, if at the date of the termination notice issue, the employee has accumulated 90 days of leave, and the employee earns 1 day of leave for every month worked, then the company must pay him 93 days of earned leave.

If the company deducts 90 days as leave taken, that would be considered illegal.

Another issue relates to the payment of salary. The employee must be paid a monthly salary until the termination date. Therefore, it is acceptable for the company to make the employee sit at home, but the employee must be paid the salary on a monthly basis. Non-payment would result in a violation of the employment contract.

Regards,

SC

Dear Subhash,

Even if there is no written commitment on either part regarding the notice period settlement process, it is default that whenever there is a termination happening, the final settlement has to be done at the earliest possible for the terminated employee to be at least happy in the end.

I do agree with what SC has stated: if there is a three-month notice period to be served and if we ask the terminated employee to stay at home rather than come to the office, then the terminated employee's pay has to be paid every month until the final date of his notice. On the other hand, settle the amount once and for all and relieve the employee with full benefits due to him at the end of the first month of the notice period.

No company can stop a terminated employee's notice period pay without any valid reason. If the pay is being stopped, then the terminated employee can either ask for a reason for the stoppage or approach the labor commissioner for the same.

Hope this clarifies your doubt.

Samba.

Thank you, members, for the details. They were really informative. However, I have this problem - We are just a 5-month-old organization, into telecom sales force management. Though we have a 2-month notice clause for resignations/terminations, people who are resigning rarely follow this - and suddenly they stop reporting for duty. We are not able to collect this notice pay. What can be done in these cases?

Regards,
Sathya

Dear Sathya,

You can follow any of the following methods:

1) If the employees are leaving in the middle of the month, you can probably stop their salary from being paid and adjust the same towards their notice period pay.

2) If the employee leaves right after the salary is credited, send a mail to them saying that they would have to fulfill the notice period clause. If they are not responding, which they normally will not as per my experience, you can add an additional line saying that if they do not respond to the mail within 10 to 15 days' time, you would be proceeding legally for recovering the notice period settlement dues (which, believe me, works most of the time even if you do not intend to proceed legally).

3) Forget about the people who have left and concentrate on the ones left and the ones whom you would be recruiting henceforth.

All the best for your choice of action.

Samba.

Dear Shobha,

In my opinion, the company has decided to terminate. So the question of taking PL/EL does not arise. Yes, his/her balance leave can be encashed at the time of his final settlement.

Thanks,
rrtpan

Dear Friends,

Thank you very much for your informative replies and active participation. I can conclude that if somebody is being terminated by the company, he/she should be paid immediately to settle his/her account. In case he/she is being asked to sit at home, I am sure that the company will not provide any written communication to the employee instructing him/her to stay at home. In this scenario, if the management's intention is not good, they could blame the employee for not attending duties and claim that he/she has left the company, thereby avoiding the obligation to pay notice pay.

If such a situation arises for anyone, he/she should request the company to provide a written statement that he/she has to sit at home and that the company will pay him/her on a monthly basis.

In the event that employees leave the company without fulfilling the requirements stated in the appointment letter, they may be liable to receive a legal notice.

Regards,
Subhash

Hi Ali,

Because it is clearly mentioned in the appointment letter that a one-month/ three-month notice period must be given by any party. If the employee is resigning, they also need to provide one month's notice. Similarly, if the employer is terminating the employee, they also need to pay for one month. It is the company's choice whether the terminated employee is asked to remain in the system or leave immediately. However, generally, in the case of termination, it is with immediate effect.

Regards, Anuradha Singh

Facts

The company has decided to terminate the services of the employee with immediate effect. As per the agreement/appointment letter, three months' notice/pay has to be defrayed. The timeframe is not mentioned.

Assumption: Termination of services has been communicated in writing.

Since the services of the employee have been terminated with immediate effect, and he has to "sit at home," it makes sense for the HR Department to ensure that all dues of the individual are cleared immediately after all clearances/ submission of No Dues by the employee. This is because a person who has been laid off is likely to lose interest in his/her work and be on the lookout for other options. Thus, his/her efficiency would obviously be low.

In case the termination has not been communicated in writing, I recommend the employee continue to reach the workplace at the scheduled hour and register his/her attendance. Otherwise, the company can use absence against him/her.

On the aspect of the company saying that they'll pay after three months - that is legally wrong. It amounts to withholding the salary without any basis for doing so. They may, at best, hold the payment until all dues by the employee to the company, if any, are cleared by the employee. Essentially, this would be the Full & Final settlement of the employee and would include all other dues to the employee like encashment of leave, gratuity, PF to be done two months after the last working day, etc. In case the company insists on holding the salary for three months, I recommend the employee send a legal notice demanding his/her legitimate dues. In any case, the services of the employee have already been terminated, so there is nothing to lose.

Regards,

Ajay

Hi Chandra,

Termination can be for a probationary or a permanently confirmed employee. Hence, payment of the notice period is required to be paid as per the terms of the appointment. By asking the employees to sit at home, you are keeping the person on the company's rolls, and this period of 3 months will be calculated as in service. That means the gratuity for this period, if the employee is eligible for gratuity, has to be paid. Why all these? And paying the employee after 3 months is certainly not right. He must be paid the 3 months' notice along with his final settlement, which should not be delayed.

Regards,
Dhinakaran

Hi,

There are 2 different questions.

One is termination - the employee is no longer on the company's payroll. You need to settle his dues within 48 hours, including the notice period.

The second is to serve him with notice, pay him a salary on a monthly basis, keep him at home for three months, and then settle his dues.

Once you decide that an employee is not required, then get rid of him immediately. Do not linger on the issue. Settle him immediately.

Regards,
Jitendra