Termination and Notice Period: Is One Month's Salary Required for Non-Performance?

Dear All, I have a query regarding the termination clause for a confirmed employee. If an employee is terminated due to non-performance and the company does not want him to serve the notice period, is the company liable to provide an advance of one month's salary? Kindly shed some light on this matter.

Thanks.

Regards,
Aarti Khanna

To my knowledge, the company is not liable to pay for one month, as this does not fall under normal termination. Usually, there is an article in the termination clause of the employment contract which states that the company reserves the right to terminate the employment agreement with or without notice in cases of gross misconduct, disciplinary issues, poor performance, violation of ethical standards and/or community values and standards, fraud, etc. The service of the employee with the company will be terminated with immediate effect.

Best Regards,
Sameer

Fine. Hopefully, it should be mentioned in the letters. Then only, it is applicable.

Regards,
Aarti Khanna

But I think before we terminate on the basis of poor performance, you need to have solid written proof. For example, in his career, you should have given him some warning letter(s) regarding his poor performance while evaluating him and explained it to him.

Regards,
Kiran Nampally

According to me, the details on termination should be given in the appointment letter if a company wants to terminate an employee due to poor performance. As Kiran has rightly pointed out, you must have solid written proof of the same before terminating.

Thanks,
M. Kannan

Hi Aarti, First of all, when terminating someone, certain points must be taken into consideration. On what grounds are we terminating him? For poor performance, disciplinary matters, breach of law, etc. Whatever the reason may be, he must be asked to provide his explanation for the allegations against him. According to natural justice, everyone has the full right to present his side/opinion to protect his job.

Whether it is included in the letter of appointment, he must be asked through proper notices for the allegations proposed against him. In cases of termination, only on the basis of the appointment order's clause, the court can have a sympathetic view towards the terminated employee, and this may work in his favor.

So, based on my knowledge, in cases of terminating confirmed employees for various reasons, please consider all possibilities before making any further decisions.

Regards, Atul Malve

Hi, as rightly mentioned by Atul Malve, there should be some justification for terminating any employee. First of all, is the employee provided with the job description? What are his/her key result areas? What was his previous performance, and what actions have his seniors/superiors taken to improve his performance? Has this information been effectively communicated to the employee, and has his confirmation been obtained?

Above all, we should not forget that we are dealing with human beings. Termination is not a trivial matter. The message conveyed to the co-employees through the termination is crucial. If other employees perceive it as victimization, it can lead to significant issues and instability among the workforce. Therefore, it is essential to handle such situations carefully. If the employment contract specifies a one-month notice period, it is advisable to honor it by paying the one-month notice and ensuring a clear exit. This approach helps mitigate legal implications and provides the employee with an opportunity to search for a new job.

Thanks and regards,
Kamesh

This is what was quoted by Aarti: "If an employee is terminated on the basis of non-performance and the company doesn't want him to serve the notice period even." I think the question is not about what measures should be followed before terminating an employee; the question is about whether, if an employee is already terminated due to poor performance, the company is liable to pay for the notice period or not???

Best Regards,
Sameer

Thanks for all your views. But what about the person on confirmation? I think it's the management of the company who plays a major role in formulating the policies and molding them too. It's mainly at their discretion.

But in any case, does the company need to pay any kind of salary for a confirmed employee upon termination?

Regards,
Aarti

Consider the following:

Any person who has worked with a company for 240 continuous days is supposed to be a confirmed employee. If management wants to sack him or her for any reason, you first need to give them a show cause notice and wait for their reply.

If their reply is satisfactory, you must give them time to improve. If their reply is unsatisfactory, you can keep them under suspension and organize an internal inquiry (to be conducted by a qualified lawyer where management and the employee will be at liberty to present their side).

During the suspension period, the company needs to pay a "Subsistence allowance." For the first 90 days, 50% of the total salary; for 91-180 days, 75% of the total salary; after 180 days, the full salary needs to be paid as a subsistence allowance.

The company needs to wait for the internal inquiry result. If whatever management claims is proved (e.g., lower performance in your case) in the internal inquiry, you can proceed with punishment based on the gravity of the offense (lower performance in your case).

After this internal inquiry and subsequent punishment, the punished employee can present their case before the labor commissioner. The labor commissioner will try to resolve issues between management and the employee to the best of their ability without compromising laws. If it cannot be resolved at their level, they will forward the files stating the issue is not resolved to the labor court.

In the labor court, both parties have the right to fight on their own and win or lose. If anything is not followed in the above sequence, management will be liable for declaring punishments on its own will and wish.

For deciding on punishments based on the gravity of misconduct, you need to seek advice from lawyers or refer to previous labor law judgments. In most cases, labor courts give decisions in favor of workers.

Regards,
Devarajan

[Phone Number Removed For Privacy Reasons]

Please check the appointment letter issued to the concerned employee to see if the termination clause includes performance issues along with conduct. If so, you can terminate without providing any notice pay, even if the employee is confirmed in the services of your company, provided the following points are satisfied:

1. A memo/notice must have been issued to the employee suggesting improvement in performance.
2. A show cause notice is required, providing reasonable time for the employee to give an explanation.
3. The principles of natural justice should not be violated; therefore, reasonable time should be given for the employee to reply.
4. An inquiry must be conducted in the presence of a witness based on the employee's reply.
5. You must have all the above documentary evidence with you.

If you have completed this process, a termination letter can be issued without giving notice pay.

With Best Wishes,
Srinivas

Please review the appointment letter issued to the concerned employee to check if the termination clause includes performance issues along with conduct. In such cases, you can terminate the employee without providing any notice pay, even if the employee is confirmed in the services of your company, provided the following conditions are met:

1. A memo/notice must have been issued to the employee, suggesting improvement in performance.
2. A Show Cause Notice is required, giving the employee reasonable time to provide an explanation.
3. Principles of natural justice should not be violated, so it is necessary to provide the employee with a reasonable amount of time to reply.
4. An inquiry must be conducted in the presence of a witness, based on the employee's response.
5. Ensure you have all the above documentary evidence.

If you have completed this process, a termination letter can be issued without providing notice pay.

With Best Wishes,
Srinivas

In your query, one point is not clear. Whether the employee is on probation or has been confirmed by your company. Please refer to the clause of termination in the appointment letter given to the employee by your company. In all probability, if the company does not want to serve the notice of termination, the employee should be paid salary in lieu of the notice period, applicable to him.

Thanks & regards,

R. K. Nair

In my opinion, if an employee is being terminated during the probation period, the company is not liable to give them notice. However, in the case of a confirmed employee, the company is liable to pay them advance salary for the mentioned notice period.

If there is a Notice Pay clause in the appointment letter, it is applicable both ways. If an employee resigns, they must either pay or serve the notice period. Similarly, if the employee is terminated, the date of termination from the date of intimation should cover the notice period; otherwise, the company needs to pay.

Key Terms: Termination and Resignation

The terms which are important and only relevant are two: termination and resignation. It is totally irrelevant to get into the reasons leading to any of the above acts or whether the act is valid. Therefore, even if the termination is not legal, it is a separate issue and in no way connected to the notice pay.

Regards,
SC

In my 32 years of career and across 8 companies, I have seen a termination order issued only once. In that case, the company opted for a settlement with the employee as the employee filed a case in court. Mostly, HR managers try to obtain a resignation from the employee. Whatever you may state in the appointment order, it cannot override the Constitution of India.

Termination Notice and Employee Rights

What Devaranjan and Srinivas have stated is absolutely correct. Any employee completing continuous 240 days of service is entitled to receive one month's notice or pay in lieu thereof if an employer wants to terminate the services of an employee. Failing this, the employee can have the termination order quashed by the labor court under the Industrial Disputes Act.

In the case of non-performance by an employee, the employer can take action for termination only after conducting a domestic inquiry as per the Industrial Disputes Act, as described by Mr. Devaranjan and Mr. Srinivas.

Thanks,

Regards,
Y C Bhardwaj
[Phone Number Removed For Privacy Reasons]

To terminate a confirmed employee, there is no option except any one of the following:

1. Pay the notice period salary to get rid of the non-performing employee immediately to avoid spoiling any more work of the organization; OR

2. Save the notice period salary, BUT BEAR WITH paying the salary to the non-performing employee for the duration of the period until you are able to prove indiscipline/non-performance on the part of the employee by adopting a due long process of disciplinary action against him by giving him/her notice, waiting for a reply, appointing an inquiry officer to adopt a due domestic inquiry process, giving due consideration to the inquiry report, and then deciding to terminate him/her, and getting the organization's efficiency more spoiled. HOWEVER, by this process, you can save the amount of gratuity due to his/her termination on account of indiscipline. SO, IT IS YOUR DISCRETION to choose any one of these two options.

Regards

Once you have terminated the services of a confirmed employee and the terms of exit as stipulated in the Appointment Letter say "one month's notice," then you are bound to pay the employee one month's salary. Also, allowing a terminated employee to serve out the notice period is not advisable.

Best Wishes,
Vasant Nair

To terminate a confirmed employee, there is no option except any one of the following:

1) Pay the notice period salary to get rid of the non-performing employee immediately to avoid spoiling any more work of the organization;
OR
2) Save the notice period salary, but bear with paying the salary to the non-performing employee for the duration of the period until you are able to prove indiscipline/non-performance on the part of the employee by adopting a due long process of disciplinary action against him by giving him/her notice, waiting for a reply, appointing an inquiry officer to adopt a due domestic inquiry process, giving due consideration to the inquiry report and then deciding to terminate him/her, and getting the organization's efficiency more spoiled. However, by this process, you can save the amount of gratuity due to his/her termination on account of indiscipline.

So, it is your discretion to choose any one of these two options.

And after all these, the employee can go to court also, and you hire an advocate for the defense case. It may be solved after a long time, and the judgment may be in favor of the employee. So, the better option is to pay him all dues and make a settlement mutually.

Regards

Termination can be done without assigning a reason. However, you need to pay the salary as per the terms of the appointment, which may be one or two months depending on the terms of the contract. If you are providing any reason for termination, you need to go through the disciplinary action process.

Thank you.

Dear Sameer,

The reason for non-performance must be important and also depends on the type of work and many other factors. In any normal condition, you cannot terminate an employee; you can only consider retrenchment. "Non-performance" is found if it is a habitual practice by the employee, and the time period of non-performance is important for termination. After all, we should settle the case because a short period of non-performance is not sufficient grounds for termination.

Regards.

Termination can be done without assigning a reason, but you need to pay the salary as per the terms of the appointment, which may be one or two months depending on the contract terms. If you are assigning any reason for termination, you need to go through the disciplinary action process.

Without misconduct, you can terminate only in cases like loss of confidence, etc. Alternatively, you can reach mutual consent with the employee. In this case, you must pay him the notice period (as applicable, three months or one month depending on the organizational manpower strength) and compensation of 15 days.

Mr. Atul is correct; it doesn't matter whether you mention the termination clause in the letter of appointment. Every establishment is supposed to follow certain procedures in case of termination. If your establishment is covered under the Shops & Establishment Act, then go through the Act for termination procedures. Similarly, if it is under the Factories Act, then you may follow the same procedure laid down in the Act.

However, for any reason, every employee should be given an opportunity to provide an explanation or enough time to prove their performance in writing. In the aforementioned case, you are supposed to pay him notice/salary for 30 days. Otherwise, you may have to face legal implications.

You may be in a hurry to hire, but be careful when firing.

Best regards,

Vishwanath

The termination depends on the level of the employee, specifically, performance appraisal. You should have appraised him of his performance in the previous reports. Additionally, you need to counsel him and warn him about his lackadaisical approaches. If he continues to underperform, place him in the firing line and terminate his services. Keep him informed that he is under scrutiny and will be terminated if he continues to underperform. One month's salary is not required.

Regards,
Shankar

I think that depends on company policy. Management needs to decide whether to allow a notice period or not. Non-performance is not an immediate situation; it requires time to address. The key issue is how serious seniors are about performance, as they are equally responsible for their performance.

Dear All, I have read the various posts on the issue of terminating the services of an employee for non-performance. In my opinion, there's a huge confusion that has been generated on this simple matter - "whether one month's wages are to be paid to the employee or not".

Exit Clause in Appointment Letter

The appointment letter always has an exit clause mentioned in it, be it resignation or termination of the services of an employee. In either case, notice or salary/wages in lieu of such notice is to be given by one party to the other.

In the present case, it is very simple - act according to what is mentioned in the Appointment Letter. In all likelihood, there should be a one-month notice clause contained in the Appointment Letter. If so, then my dear friend, your Company is obliged to pay the concerned employee one month's salary/wages as part of his/her full and final settlement.

Trust the matter is clear now.

Best Wishes,
Vasant Nair

Dear Vasanth Nair & M/s. Aarthi Kanna,

Termination and Legal Considerations

The appointment order will not hold good when this termination is contested as a case with trade unions, the labor commissioner, and the labor court. Hence, it is better not to proceed solely according to the appointment order but to follow the law (ID Act & standing order).

In any case, it is advisable to pay notice pay or more than notice pay and support the employee until he finds another job and settles down. Keeping the employee in your control is very important, even if you no longer require his services.

Regards,
Devarajan.N.R

Termination Notice

During the period of probation and after confirmation, the services may be brought to an end by either side giving one month's notice to the other or paying one month's salary in lieu of notice. This is not applicable in the case of discipline, attendance, non-performance, or any other disobedience of company rules.

This is the termination clause mentioned in our app/confirmation letters. I think salary giving is not applicable.

Regards

I don't know what you are presuming about termination on account of discipline, attendance, non-performance, or disobedience. But, if you think that your organization can terminate the employee with one stroke by merely issuing the termination letter without observing due formalities required in disciplinary proceedings, I am afraid your presumption is not correct. The very next day, the employee will go to court and prove his termination to be wrong. This would come over the head of the management, as a more undisciplined employee, becoming a headache for the management as well as other colleagues and spreading indiscipline among other employees.

So, even in cases of discipline, attendance, non-performance, and disobedience, you may also have to give him an opportunity to defend against the charge by serving him with a notice/charge sheet and to prove the charge against him before his termination.

Important Precautions Before Termination

SO, PLEASE DON'T FORGET TO TAKE ADEQUATE PRECAUTIONS BEFORE TERMINATING ANY CONFIRMED EMPLOYEE. The rest depends on you and how you would like to take my advice.

In your case, please see your appointment letter. Does it contain a clause regarding your obligation and that of the company's at the time of dispensing with the service? If not, does your letter specify that your service is terminated for lack of proper performance? If so, it amounts to charging you for inefficiency, for which they should give you a proper opportunity to explain your conduct/situation. If that is not done, your termination of service is illegal. If you are not in the probation period, you ought to have the employer pay for the notice period in lieu of the notice.

Termination Procedures Under the Factories Act

This is for the information of all that there is no provision for termination or any procedure laid down for the same under the Factories Act.

Also, it is relevant to state that there cannot and should not be any conflict with regard to the terms and conditions of employment stipulated in the Company's Standing Orders and those mentioned in the Appointment Letter.

Well, as Mr. Dhingra has very correctly summed up, while terminating an employee's services, all relevant safeguards MUST be considered before implementing such decisions to avoid legal complications and resulting grief at a later stage.

Regards,
Vasant Nair

The Factories Act and Standing Orders are essential for the day-to-day operations of any company. In the case of termination, one must adhere to the Industrial Disputes Act.

Regards,
Deva

The Industrial Disputes (ID) Act does not lay down any specific process or procedure for the termination of an employee. Instead, it is the Company's Standing Orders that outline the entire process of employee separation. Any industrial dispute that arises typically falls under the provisions of the ID Act.

Thank you for educating me on this matter!

Cheers,
Vasant Nair

Termination of a Confirmed Employee Without Notice

Termination of a confirmed employee without notice or pay in lieu of notice can be challenged in court. Such termination may be treated as illegal. You must give a warning letter first, and then you can proceed with termination if performance does not improve. This is injustice. Why did you not terminate when the employee was under probation? An employee alone is not responsible for performance decline. A mentor or the boss is equally responsible.

Regards

Validity of Termination and Employer's Liability

Is the termination below valid, and is the employer liable to pay two months' salary along with the pending salary of 15 days, plus compensation for mental torture and harassment?

I am a confirmed employee and worked in a senior position with an MNC. I requested casual leave via email due to a severe problem. My services were terminated without any notice. My appointment letter includes a clause stating:

"Termination of Employment

During the probationary period and any extension thereof, your services may be terminated on either side by giving one month's notice or salary in lieu thereof. However, upon confirmation, the services can be terminated from either side by giving two months (60 days) notice or salary in lieu thereof."

Queries Regarding Employer's Liability

1. Is the employer liable to pay my pending salary, which is for 15 days?
2. Is the employer liable to pay the notice period salary, which is for two months?
3. Is the employer also liable to pay compensation for illegal termination?

The reason for termination was that I merely asked for medical/casual leave and deputed my junior in my absence to look after my work. Throughout the year, about 20 casual leaves are pending against me. Initially, I received an email from the company director stating:

"Anyhow, you are free to discuss your problems with me at any time, 24x7. You should have informed me before going, at least on the phone. Please try to contact me on my cell phone and discuss your current problems. Meanwhile, I will request the ED to allow you to work on your laptop."

A few days later, I received another email from the office network:

"Since you are absent from your duties w.e.f ------ without any prior approval from the undersigned. Further, to inform you that the undersigned made several phone calls, but you did not respond. You intentionally switched off your cellphone. Keeping the above in view, it seems you are not interested in serving further with the company, and management has lost confidence in you. Your services are hereby terminated from the strength of the company with immediate effect. You are hereby advised, being a Manager, that a huge charge is lying with you. It will be better that you hand over the charge of your department and submit your identity card and other official documents to the undersigned."

Lastly, I replied with the exact wording below:

"As per my last email, I applied for medical leave and also replied to your email in which you requested ---- to allow me to work through my laptop and also discussed with you verbally through the phone. My cell phone has never been switched off since ------. If you have also lost faith in me, then you can ask me to resign myself instead of terminating me in this way. In my ---- years of experience, no single employer has terminated me, and your termination is a total violation of the principle of natural justice. As per the rules of the company and the conditions of the appointment letter, the terminated employee is liable to receive two months' salary from the company in case of termination by the employer. So now, what I assume is that I am on medical leave or terminated.

Thanks."

Regards,
Manjiv

Dear Manjiv, you did not mention whether you had a phone conversation with your director when you were first asked to contact him on his cell phone. If you did have a conversation, what was the outcome of the discussion between you and the director?

Regards,
Manjiv

Termination of service for non-performance is not a normal action of the employer, which may involve a controversy regarding the admissibility of notice or notice pay in lieu thereof. Pre-conditions in the instant case are as follows:

(a) Laying down of performance norms by the employer on record;
(b) Communication of these norms to the employee concerned, like all other employees falling in the category;
(c) Communication by the employer to the employee regarding deficiency in his performance and allowing him an opportunity to explain his conduct in this regard to meet the requirements of natural justice.

If the above parameters have been complied with by the employer and he is not satisfied, he can then terminate your services, and for that, no notice period is required.

In the event an employee is terminated without any clause in the appointment letter specifying termination due to poor performance or misconduct, the employer is liable to pay the employee's two months' notice period salary if the employee is confirmed. If the employee serves a legal notice regarding this matter along with a request for compensation for harassment and mental agony, the employer is also liable to pay.

Is the process of termination discussed for employees at the workman and executive levels the same or different? When terminating an employee for poor performance, is the procedure the same after completing the probationary period and confirming their work status? If the processes differ, could you please clarify how they vary?

Regards,
Bharat

The instant case does not fall within the ambit of cessation of employment by either side in the normal course. Non-performance is one of the misconducts as defined under the rules of conduct applicable to the employee concerned, and the case shall have to be dealt with accordingly. The clause of one month's notice by either side will not apply.

Regards,
S.K. Johri

Compensation for Terminated Employees

No confirmed employee can be terminated without paying some compensation. This could be a minimum of one month. If an employee is terminated without being given any notice or compensation, and if he makes an appeal in court, the compensation amount may increase to three months if he is able to prove that he has been victimized. Termination of a confirmed employee is normally not done; instead, the company pays some compensation and obtains a resignation to settle his account.