Is It Legal for Companies to Withhold Salaries During Notice Periods? Seeking Advice on Employee Rights

I need to know if it is legal for any company to stop salary payment during the notice period just because an employee has resigned. The matter in question is about a well-known telecom software company in Bangalore that stops salary payment from the day the employee has resigned and settles it one month after the last working day. This essentially means that the employee is left without a salary for three months since the notice period is two months. Many employees have faced this situation and have suffered financial and emotional stress because of this policy. Even senior managers are aware but do nothing about it.

Payment of Wages Act: Reasons for Delay

As per the Payment of Wages Act, a delay in payment can only be due to the following reasons:
1) Salary calculation was wrong
2) The parties involved in executing the payment were not present (employee, employer)
3) Act of God where the business could not run as stipulated
4) Any involvement of a third party as a mediator which has failed the transaction
5) Absence - disqualifying payment in part or whole

Apart from this, there is no provision for delaying or stopping payment because an employee has resigned. This malpractice has to stop, and hence, I need advice from forum members on how to proceed as many of my colleagues are facing this situation. Members are requested to give legitimate advice and not suggestions.

Same thing happened to me in a Mumbai-based ISP/Telecom company. They stopped my salary without notice from the day they received my resignation. Even after numerous email follow-ups with the HR team, they didn't reply. Finally, when I asked them face to face, they explained that after resignation, the salary process changes and doesn't credit normally. They informed me that they have to block the ongoing salary and provide a full & final salary with deductions (similar to a bill). Furthermore, all pending salary is given 45 days after the last day in the company. This waiting period is quite unreasonable, and if one hasn't given the full notice period, then double salary for one day is deducted (one for not working and one as a penalty for the shorter notice period).

Ultimately, the helpless employee can't do anything but accept the delayed payment and bid farewell.

I hope at least one person has handled a situation like this. Please suggest any measures.

Please answer the question asked by sumasatish. I also need the answer to that question immediately.

Addressing Salary Withholding Issues

Stopping the salary or wages is against the rights of any registered organization. It totally depends on the circumstances and the nature of clauses in the appointment letter upon leaving. Most of us do not read the clauses at the time of joining or never take them seriously. Also, at the time of giving handover, people do not bother to obtain the NO DUE CERTIFICATE.

Kindly get in touch with the LABOUR INSPECTOR at your local labor court with a copy of the resignation acceptance, the appointment letter, and the no due certificate. The process may be slow, but it will help you to receive your hard-earned money.

Regards,
Muddassir Habib Mustufa
HEAD HR LAL MAHAL RETAIL LTD.

Immediate Resignation and Salary Payment Issues

Kindly let me know if the employer asks us to resign on the spot, without asking us to serve the notice period, and if he says that he will pay us the salary on time. However, it's been 60 days, and he has not paid. Kindly suggest what steps an employee can take.

Regards,
Siraj S

Hi all, I need your suggestion. I left my job immediately to join a new company with a higher position. Now, people from my previous company are putting pressure on me, threatening legal action. I worked at my previous company for 15 years. Previously, when one of my colleagues left, they deducted one month's salary. I am okay with a one-month salary deduction. Will they also deduct my PF and gratuity? Please suggest.

Thank you,
Babu

Resignation and Notice Period Dilemma

I was working in an International BPO as a Sr. Business Analyst for the last 2.8 years. I resigned instantly due to some family problems. The company didn't accept my resignation and asked me to serve a notice period of one month. I requested them that I’m not able to serve the notice period, but they didn’t listen to me.

Then I decided that I would serve a one-month notice period (using my 24+ days of earned leaves during the notice period and coming to the office for the remaining 6 days to hand over my duties) before relieving myself from my duties. My last working day in the company will be 30th June 2015.

The company replied to me: "Your notice period is of 30 working days, which shall not be adjusted with earned leaves. You have to serve your full notice period. We will pay you for your earned leaves."

After that, I resigned instantly and did not serve any notice period.

After one week, I received a mail from HR: "Please refer to Point No: 4 of your Service Agreement CUM Appointment Letter No: CB/HR/DE/SA/2012-13/0043 dated 17th Jan 2013. As per Point No 4, Term of Employment: 'The term of the Employment shall be the duration of the survival of this agreement. The Employee shall serve a notice period of Thirty (30) Working days after written resignation. The Employee will not be eligible for any pending wages, emoluments, benefits, experience certificate, or relieving letter in the eventuality of noncompliance with the Thirty (30) working days’ notice period.'"

So, in view of the above, you are not eligible for any wages, experience letter, or relieving letter in the eventuality of the employee either absconding without giving the resignation or giving a resignation but not serving the due notice period.

Please suggest. I have pending more than 2 months' salary + earned leaves + PF.

Regards

Unfair Labor Practices in Multinational Companies

All the above episodes clearly show how multinational companies and some domestic industrial giants resort to unfair labor practices by introducing ambiguous terms and conditions in employment contracts. They take advantage of the precarious position of employees. It is unfortunate that the minimum legal protection and decent treatment based on humanitarian principles of equity and natural justice, available to the lower stratum of workmen, are not extended to employees of higher status. Because of this, certain managements exploit employees to the maximum extent possible whenever they seek greener pastures conducive to their career growth.

Breach of Contract and Legal Recourse

Regarding the queries raised by Sixstringer and Greatidea, the postponement of salary after the issuance of a notice of resignation is certainly a breach of contract by the employer. A civil suit can be instituted against the management for damages due to breach of contract, as well as for causing pecuniary difficulties and mental agony. Inter-departmental procedural formalities and practical difficulties cannot be proper excuses.

HR Department's Responsibility

The problem narrated by Sumasatish is ultimately the problem of the HR Department. Since the two employees were terminated at the month's end, it is the duty of HRD to transmit the exit report promptly to Finance. HRD's slackness in parallel communication is the root cause of the wrong payments. Therefore, let the HR person on duty at that time make good the loss.

Legal Action and Gratuity Claims

Let Ysbabu await the legal action to be taken by the management. At best, they can sue you for damages, which cannot be more than one month's salary as in the earlier case. They cannot withhold gratuity on this score. Send a notice for your gratuity; if either gratuity or a reply is not received within the time stipulated in your notice, file a claim for gratuity together with interest for the period of default before the Controlling Authority under the Payment of Gratuity Act, 1972 for the area. Regarding your PF accumulations, apply for a transfer of your accounts under Sec. 17-A of the EPF Act, 1952.

Unlawful Service Agreement Conditions

The condition relating to the forfeiture of pending wages and other monetary dues in the Service Agreement-cum-Appointment Orders is arbitrary and unlawful. So, Chetan Kumar, send a notice for payments accordingly, and if no response is received, file a suit.