Can We Legally Hold an Employee's Salary for XYZ Reasons? Seeking Advice!

Hi, I wanted to know if we can place a hold on an employee's salary due to XYZ reasons. Is it legally permitted?

One of the reasons is if the management becomes aware that the employee is not planning to resign formally and intends to abscond after receiving their salary.

Another reason is if the employee has been irregular, frequently absent, and has taken leaves without informing the management.

The first reason is illusory, and you can't hold someone based on mere imagination. The second reason falls under Loss of Pay (LOP) or leave availing; however, holding salary for unauthorized leave may be permissible.

Pon

Salary Hold and Job Abandonment Guidelines

As long as an employee reports to work, their salary cannot be withheld.

In cases of job abandonment, "No Call No Show" guidelines can be followed. Even if you are expecting a resignation, the employee must be paid until their last working day.

I have corrected the spelling, grammar, and formatting errors in the user's input. The message now appears more polished and maintains the original meaning and tone.

Question on Salary Hold

Hi, I wanted to know if we can place a hold on an employee's salary due to XYZ reasons. Is it legally permitted?

You being a full member, I can merely express my surprise at the nature of your question, particularly when you state XYZ reason! Why would you like to stop the salary of an employee if he has discharged his duty? Do you think an employee is a bonded laborer of the management and should remain at the mercy of his employer whether that pays or not the compensation for his work?

Regards,

The reason I wrote this thread is to gain knowledge and understand what happens if this issue persists. It's not necessary that I am involved in such an activity or that it reflects my feelings. It is merely a question.

Dear Shivani, The reason must be specific. Quoting "XYZ" would mean any frivolous reason on account of which the salary is sought to be put on hold. So, if you desired to gain knowledge, you would be better off quoting certain reasons that you think management often considers to withhold employees' salaries.

Not sure why you would want to hold back the salary unless the incumbent has not fulfilled his duties as per the company's guidelines. If he is not handing over company property, then this is another issue altogether.

As Mr. Dingra pointed out, if you can share with us any specific reason you have in mind, then I am positive the forum would guide you by providing you with appropriate options or courses of action.

Consequences of Holding an Employee's Salary

Holding an employee's salary is unethical in nature. This action can have several negative consequences:

• It can harm the reputation of the company.
• It may be viewed as harassment.
• The employee could potentially file a criminal offense case.

Regards

The reason must be specific. Quoting "XYZ" would mean any frivolous reason on account of which the salary is sought to be put on hold. So, if you desired to gain knowledge, you would better have quoted certain reasons which you think the management often considers when withholding employees' salaries.

I think he did give the reasons in his following emails. I agree it would have been better to get reasons in the original post.

First, in either case you have mentioned, holding back salary is difficult. But again, it depends on the size of the company. If it's a small team with manual payroll, it's easy to hold back or delay salary (and no police station will bother coming and asking you why you didn't pay him salary. Let anyone challenge me on it).

If it's a large company, this is more difficult.

Payroll Processing and Company Policies

Also, when you process your payroll is important. I know smaller firms that delay payroll just so that someone will not be able to leave without notice without sacrificing 1/3 of the salary.

There are companies where the rule is to not give salary during the notice period till full and final settlement. So, lots of things depend on your company rules, HR/IR issues, etc.

In any case, you can hold back salary on suspicion for a few days. In the end, you have to confront the person and deal with it. Remember, once you hold back his salary, you have lost that employee anyway. He may, in fact, then try doing more damage on his way out. Consider that also.

Looking forward to a discussion on this and feedback from members on my points.

Two Dimensions to Consider

There are two dimensions to this:

a) You want the employee to perform and be retained.

b) It is punishment for non-performance, and retention is not the motive.

In such a case, you need to issue a fresh appointment letter wherein such employees can be rechristened as consultants with no leave or other company benefits. Further ahead, such employees could be given targets, and their salaries revised with a target achievement pay. For example, if you pay an employee 40k, you need to restructure his salary and make 25k incentive-based. The performance parameters should be achievable and based on sound analysis or past records. This has to be done in a calculated and well-communicated manner. At the same time, HR should start looking out for a replacement.

Stopping the salary is not a criminal offense as per Indian Law. If the employee does file a police complaint, the company can use its imagination to get even. However, it leaves a bad influence on other employees and eventually is counterproductive.

Your query is very much genuine for one's knowledge. As per my understanding, it depends upon the company's norms and policy. Whatever you do, it should be transparent to the employee, ensuring they understand what actions can be taken if a person absconds or leaves without informing. Generally, inform them as you would with other policy-related information. It should not come as a surprise to them. Sometimes, even after informing them, it becomes a mutual agreement to relieve them, so just make it transparent.

I hope this will work for you.

I have a very humble request to the people who replied on this thread. Kindly consider us as learners. Don't expect that we can't ask a simple query, which is equally important. This forum gives us all the opportunity to sort and discuss our doubts and learn new things.

Regards,
Shalini

I received this response from my mentor. Please consider his contribution as shared below:

1) As a general rule, salary cannot be put on hold even if the reasons are genuine, sound, and serious.

2) An employer's response to such objectionable reasons, legally, could be only in the form of "punishment," "wage cut," or deductions from the wage. For deductions, you have to refer to the Payment of Wages Act 1936, wherein under section 7, the permissible deductions and the process are stipulated. Section 4 mandates that no wage period can be more than 30 days. Section 5 states that the wage must be paid within seven days of the expiry period.

One could go on, but to professionally handle this matter, one would like to know:

Questions to Consider

1) The form of the organization.

2) Nature of the industry.

3) Total employment.

4) Are we talking about "workman" under the Industrial Disputes Act 1947 or any other category?

Answers to these and similar questions will decide the approach to the problem stated by you.

However, please note that employment, being a contract, the relationship between the employer and the employee is ALWAYS determined by the terms and conditions of employment, the law of the land, and any further contracts between the parties. None shall conduct outside the parameters of this situation.

Employee Absence and Salary Withholding

As Shivani has mentioned, I am also facing a similar situation in my organization. One of our site employees was on leave for 15 days without any information. When HR and his HOD asked him about his extended absence, he provided unacceptable answers, claiming he was hospitalized while in his hometown. Subsequently, we requested original bills and documents from him to facilitate his medical claim as per company policy. However, he declined, stating he had no such documentation. The very next day, he joined our client's organization without formally resigning from our company. Consequently, we have had to withhold his salary as we have incurred a significant loss of 35 lacs at that specific site where he had been working for the past year, with no documented record of his work.

Could you please advise on whether holding his salary was the correct course of action? In my view, it is essential to analyze the situation thoroughly before taking such measures against an employee.

Regards,
Amitav Nanda

Dear Shivani,

Understanding Leave as a Privilege

1. Leave is not a right; it is a privilege granted to an employee by the company.

2. You cannot deny anyone's leave without a valid reason. However, leave can be denied due to auditing, inspection, or a shortage of manpower caused by other employees being on leave.

Considerations for Leave Approval

3. Here are some factors to consider:
- (a) Leave is available in the employee's credit but not applied for or proceeded with.
- (b) Leave is not available in the employee's credit, but it is applied for from future leave and not sanctioned or proceeded with.
- (c) Leave is available in the employee's credit, applied for, but not sanctioned due to any of the reasons mentioned above.
- (d) Leave is not available in the employee's credit, not applied for, and the employee absconded without information.

Handling Salary and Trial Procedures

4. You can withhold the employee's salary until their charge sheet is trialed. During the trial period, you may sanction an advance of pay on compassionate grounds, considering the employee's family's livelihood.

5. If the employee's trial is completed after a detailed inquiry and the board of inquiry recommends any major or minor punishment, it should be recorded in the Brief Justification, Findings, and Recommendations, and Trial papers. The employee must sign the documents as read, understood, and accepted. The HR Head must then send a note with the details of the punishment (if any financial implications are involved) for implementation and a note for the release of the employee's salary. Only then can the salary be released.

Releasing an Employee

6. If the employee has been served with three such notices and continues to abscond for long durations, they can be released from the company after a summary trial. The reason must be clearly mentioned as "Long Absent (Last Date of Attendance)" in their service certificate or relieving certificate.

7. For such a release, you must pay the employee Notice Pay, Retrenchment Compensation & Gratuity (if applicable and eligible), Leave Pay (whatever is in their credit), and the Bonus for the period served (if eligible).

Post-Trial Leave Adjustments

8. Once the absence period has been trialed and the employee has been awarded punishment, no days of leave can be deducted for any adjustment.

Additional Considerations

Further, if an employee causes any loss or damage to machinery or property, their salary can be deducted up to the extent of the loss incurred. Any advance paid to the employee can be deducted from their salary or final benefits. The employee can be called after two months and instructed to fill out their PF Claim (Form 10C and Form 19), which can then be forwarded to the PF Office for the release of their PF from EPFO.

As an HR professional, you must be both a Human Resource and a Humane Resource. You must have empathy, not just sympathy.

Wish you all the best.

Holding Back Salary for Employees Leaving Without Notice

The original query was about holding back salary in suspicion that the employee will leave without notice. In your case, it's different. You are talking about someone who has left without notice. You are very much right in withholding his salary.

In fact, given the magnitude of loss, you can file a criminal complaint with the police. His current employer will not appreciate having someone with a criminal case against him and also the investigation ongoing.

You cannot withhold the salary of an employee even if you know that he/she is going to resign. You can certainly deduct the salary for absence from duty without prior information or permission.

Regards,
S.K. Johri

My dear Nanda, I have gone through your suggestion regarding withholding the salary of an employee. The absence from duty is governed by the fact and law that he may be sanctioned leave and taken on duty if he/she explains to the satisfaction of the employer as to the valid reasons for his absence from duty without prior permission/information. In your case, once the employee did not satisfy the management on the above count, the management has rightly withheld the salary of the employee. It could rather deny the salary for the relevant period.

Regards,
S.K. Johri

The law governing absence from duty by an employee stipulates that if he/she explains to the satisfaction of the management the reason for the absence from duty, one can be taken on duty by sanctioning the leave of the kind due. Also, leave without pay, else the management is within its right to deduct (not withhold) pay for the relevant period. The pay cannot be refused/withheld for any apprehension but for a violation of specific provisions of the conduct as prescribed in the Company's letter of appointment or code of conduct applicable to the employee.

Regards,
S.K. Johri