Employee Resignation: Can a Company Skip Notice Period Compensation? What Are Your Options?

Hi,

An employee in my organization has submitted his resignation and is willing to adhere to the one-month notice period specified in his appointment letter. However, the company wishes to release him immediately without serving the notice period. The employee is open to this arrangement but expects compensation as outlined in the appointment terms.

The company is refusing to provide payment in lieu of the notice period. What actions can be taken in this situation?

Hi,

Please shed some light on this. Is he being terminated? Is he confirmed? Why does the company want to relieve him immediately?

Hi there.

He is a confirmed employee. He is not being terminated, but now that he has voluntarily resigned, the company does not want him to serve a notice period and wants to relieve him immediately. However, they are not willing to pay his salary in lieu of his notice period.

Hi,

If he is willing to serve the notice period, he should be allowed to do so. Please let him know clearly that no compensation is liable to him if he is being relieved immediately. This information should be conveyed after you have thoroughly checked your company policy.

This is a funny situation. If the guy wants to leave on his own accord, why does he need a salary? And if he is willing to pay his notice period amount, the company should accept it and resolve the case. People are complicating it unnecessarily, I feel.

Cheers,
K

Hi,

It would be unethical on the part of the organization to relieve him without compensating him. Generally, there are very few employees who are willing to serve the notice period. Understanding his situation, he would have requested a date of joining which is 30 days from the date of the offer to ensure that he serves the notice. As you have stated in your appointment letter that the term is mentioned, I suggest that he should be allowed to serve the notice or be compensated for the same.

Actions like this affect the behavior of others in the organization. They might assume that one is not needed once he or she has resigned, or some might not serve or give minimum notice.

Best wishes, Sunil Joshi Manager - Human Resources

The guy is willing to stay for 30 days in the company. It is the company that wants him to go immediately. How should we handle this?

If the management themselves do not want to follow the rules set by them, one cannot do much. Try to convince the management that since it is company policy, the company has to pay him the salary in any case. Also, since he will be serving the notice period and will be leaving, his last month's salary will be adjusted in his full and final settlement.

Cheers,
K

It may, but has remote possibilities. This would depend on the resources of the employee.

I have dealt with labor cases in my first organization. Out of several litigations, there was only one which kept me on my toes. This employee had political connections and was able to sustain. Normally, since the employee is the sole bread earner, they refrain from getting into such situations. But this will affect the other employees for sure; it's more of a cultural issue than a legal issue.

Best wishes,
Sunil

Hi,

If he has resigned from his position with the company, it is now at the discretion of the company to relieve him. The maximum time period that can be asked for by the company is the notice period. The company can't ask him to stay for more than the notice period if he wants to leave. So, the company can relieve him anytime within the notice period. Compensation for the notice period is applicable only when the company wants his exit.

Regards,
Pankaj Mittal
ARCHELONS Consulting

Sunil is right in pointing out that this will set up a bad example for other employees. People leaving without a notice period is a nightmare for most companies. For example, if a sales guy leaves a company without notice and the company doesn't have an effective CRM in place, they will lose a lot as his accounts shall be lost forever.

Surya

Dear Sunil,

You have to pay notice pay to him under this condition as one month notice is part of the appointment letter/contract. The only other remedy is to take an application from him for early relieving voluntarily. Please understand the meaning of 'notice pay'.

Regards.

I agree with Mr. Sunil Joshi's contention that it is more of a cultural issue than a legal issue. This is because normally, the appointment letter has a clause that the employee will have to serve a specified notice period before resigning from the job. The employer also has an obligation to give a similar notice to the employee before terminating his/her service. In both cases, cash settlement in lieu of notice period can also be specified.

Looking at the logic, the notice by the employee is to enable the employer to arrange for a replacement for the resigning employee, which may be done by recruiting a new person or by training an existing employee. However, if the employer already has an employee who is trained for the job being carried out by the departing employee, the employer may dispense with the notice period and make it appear as if they are doing the employee a favor. Please remember that the employer's obligation is only to relieve the employee within the notice period and not to extend it arbitrarily, as that would be illegal.

If the employer says, "We know you are supposed to give us two months' notice, but we are waiving off the notice period and are relieving you of your duties with immediate effect," would that be a breach of the terms of employment? It may not be illegal, but it is certainly unfair because the employee may struggle to support themselves and their family during the remaining notice period without receiving a salary.

In many cases, employers do not view departing employees as goodwill ambassadors but rather harbor feelings of vengeance towards those who resign, given the high attrition rates many industries are experiencing today.

Additional thoughts on this topic are welcome.

After all, not many employers consider the departing employees as their goodwill ambassadors, but are generally full of vengeance towards anyone resigning, given the alarming rate of attrition most of the industries are facing today.

Nicely summed up:

Well, it depends on the bargaining power of the company. If they don't have anyone to pick up the responsibility, and these days good candidates sometimes take months to find, then they are in a real mess. Secondly, most companies fail to improve their policies, structure, procedures, wrong hires, competitor standing, etc., based on the exit interviews. It's a subjective question; the HR person shall have to make the boss aware of the significance of various factors.

Surya

Dear Friend,

It all depends on the terms and conditions that have been accepted in the joining letters. Kindly follow them.

Regards,
Pravin

Dear Liz327,

I have stated this in my earlier post and am stating it again that the company is absolutely right in not paying "Notice Pay." The liability of paying notice pay by the company arises only and only in the case of termination.

In the case of resignation, the company has the sole right, after accepting the resignation, to decide on the date of release, subject to the maximum period of the notice period as per the contract of employment. Therefore, it is not justified to claim notice pay when a person resigns since the liability for the company arises only in the case of termination and termination only.

Regards,
SC

Hi,

I think if you are relieving him earlier, you should pay him one month's salary. Please read his appointment letter. Does it state one month in lieu of notice on either side?

Regards,

Marvin

I agree with the inputs shared by swastik73.

When the separation is triggered by the employee, the employee is obligated to serve the notice period or pay the notice pay to the extent the notice period is unserved. The employer can choose to waive off the notice period. Also, the employer is not obligated to pay any amount in case they choose to waive off the notice period.

However, in case of separation initiated by the Company, the employer should provide a notice to the employee or pay notice pay in case sufficient notice is not given. On similar lines, in such a case if the employee decides to leave earlier, the employee is not obligated to pay notice pay to the Company, as the obligation is on the employer.

Nivedita

If the employee's cause of separation is due to voluntary resignation, Management has no liabilities except for the pay due to the employee as stipulated in the contract prior to his resignation.

It is one of management's prerogatives to terminate employees, but due process must be observed to avoid illegal dismissal. If Management fails to give due process, the employee has the right to file a case against the management. To avoid the hassles in labor cases, management must settle it with the employee; thus, compensation comes up.

Hi Liz,

It's a complicated situation, and I can understand it.

If the company had initiated termination, then you could have relieved the employee without any compensation or notice period.

Since the employee has submitted the resignation and is ready to serve the notice period, you have to adhere to the terms of employment, as it is a legal obligation for the company.

Please let me know if the company wants to terminate him on ethical or performance grounds.

If he has to be terminated based on performance grounds, a written communication should have been provided to the employee, and his notice period should have been set against the performance improvement period (following a performance improvement plan). Then, he could have been terminated on performance grounds (a specified time period should be mentioned for the same).

If he has to be terminated on ethical grounds, the same should have been documented. The grounds of the offense that has been committed and a reporting procedure have to be documented. The employee should be given an opportunity to comment on the offense committed, and a committee comprising HR and senior leaders should be formed to evaluate the offense/breach and make a decision in which the employee has to be involved. Every aspect should be documented.

In case you are not satisfied with this, please let me know the exact situation so that I can assist you with a solution.

Warm Regards

viv.bs@hotmail.com

Hi,

If anyone resigns, generally, management asks them to give notice as per the terms of their appointment order. If the employee wishes to be relieved early, they are asked to pay the short notice period payment. In this situation, if the concerned employee is willing to give notice, management must accept the same. If they want to relieve the employee immediately, they should pay compensation for the same.

Regards,
Ashok

Dear Liz327,

What Nivedita is saying is absolutely correct. I confirm that in case of resignation, the company is not liable to pay any compensation and can release him anytime it deems fit, subject to the maximum notice period.

Regards,
SC

What if the employee was in a service agreement with that company and if the company had initiated termination, then is this a breach of the service agreement? The employee does not have any proof, like any termination letter. In that case, what should the employee do?