Again, there is no law governing notice periods. It is defined as per Company policy, practice and industry norms. Notice period is widely based on the basic salary.
You can make that on gross salary and make suitable HR policy on the same. But appointment letters must also specify basic or gross clearly. Past appointment letters cannot be detrimentally changed to gross salary unless the employees agree in writing to the change in terms of their employment. Unilateral change by management will be illegal and legally null and void.
The points to ponder before changing from basic to gross are :
1. Is it a normal industry practice. If not, employees will be disgruntled and will relent. Attraction of talent will become difficult with detrimental terms of employment as compared to the industry/competitor practices
2. What would be the impact? Will essentially attrition reduce with this move? May not..
3. Can a larger amount of payable be recovered from employees? They may escape without fulfilling the obligations. Piled up legal notices, if so, will give a negative branding to the Company.
4. Will the Company's liability not increase manifold in case a downsizing/rightsizing exercise done by the Company at any time in the future.
5. Tax liability of both employee and employer may increase in case of payables apart from computational hassles (annual components apportionment, taxation, retention pay proration, etc)
6. Even good employees' motivations may sink low.
Think about the many cons in this approach. Rather than sorting out attrition, it may land up creating a plethora of unforeseen problems.
There could be methods like legal notices, detrimental bonds, withholding of good character certificates and recommendation letters, etc. adopted by HR, per force. Other methods can also be thought through.
Rahul Kumar
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