Is It Fair for My Company to Change Superannuation Rules Without Notice?

I am working in a small IT company in Bangalore, India. We have a misleading superannuation fund in our salary component, which was started effective from 1st April 2007, but it was not mentioned in any of the HR policies, employee handbook, or in any notice/circular. Whenever it was asked by an employee to HR, it was explained verbally and not by email or any official communication that it is not maintained by LIC but company-managed, and the eligibility for this fund is 5 years.

As far as we know, the company has not established any trust and is not investing in secure bonds or any such thing for employee benefit. In the last week of completion of 5 years, the COO of the company informed HR to publish a policy in the HR portal and mention the Superannuation Policy, which will have the eligibility criteria as retirement from the company at the age of 58 years.

How fair is this? Can the company do this?

Legality of Holding Employee Funds

Holding money of employees (amounts deducted from the salaries other than those mentioned under Section 7 of the Payment of Wages Act) without a registered trust seems to be illegal. You may want to seek a legal opinion in this regard.

Regards,
Madhu.T.K

Dear Mathu, my company also maintained a Superannuation fund with LIC, and the superannuation contribution (10% of basic salary) is included in CTC. However, if the employee leaves before 5 years, they cannot receive the benefit/contribution amount. Could you please clarify if there is any possibility of a return?

Regards,
K Subu

If it is a deduction from salary, you are bound to refund it. On the other hand, if it is not a salary portion but only a benefit to employees, you need not refund it if the employee does not qualify to get it as per the policy.

The Problem with CTC

The problem with CTC is that you make all expenditures as part of CTC, which will become a legal issue later on. Moreover, you are deducting it from the salary. That means you have to pay it back.

Regards,
Madhu.T.K

Understanding Superannuation in CTC

Superannuation payment in CTC, excluding gross salary, is a benefit from the employer's side. This is achieved by adding 15% of basic pay plus dearness allowance of 12 months' salary to LIC. The period is typically 5 years or as decided by the group superannuation trust trustees and beneficiaries. Superannuation is payable based on the decided period of service rendered. Therefore, if an employee leaves before the completion of the "super annuity" (CTC part) service period, for example, 5 years, in this case, superannuation is not payable.

Superannuation is considered part of the CTC and is akin to a pension scheme. It reflects the employer's financial welfare to the employee for their continuous job engagement.