Is My Company's 6-Month Appraisal Lock-in Clause Legal and Fair? Seeking Advice from HR Experts

Respected Members, I am a new joiner to this forum and came here to seek your help and guidance on the following issue I am facing with my current employer. I am working with a midsize IT company in Mumbai with 7 years of IT experience. I have completed my first appraisal cycle. I have received my revised salary letter along with the following clause:

"In the event that an employee leaves the organization before completion of 6 months from the date of the letter, the appraisal shall stand canceled, and the amount appraised shall be reversed during full and final settlement."

The HR has defended this clause by saying that it's the way the company is safeguarding the risk of high attrition, which is observed after the appraisals are rolled out.

Though I believe that employers have all the rights to safeguard their interests, I have concerns over the legality of such a clause, which is introduced all of a sudden.

I would appreciate it if the experienced and knowledgeable people in this forum could help me validate this clause with industry best practices and suggest if I should accept this clause.

P.S. Kindly excuse me if this topic was discussed previously.

Best Regards,
Abhishek

The locking period concept is usually used for fresher joinings, training, and any special purposes—not for regular appraisals. What the company seems to fail to recognize is the fact that the appraisal is a sort of reward given for performance in the past year—not for future performance.

Legally, I suggest waiting for other legal members to respond. But prima facie, I think irrespective of the legal aspect (my view being that this is illegal), what you need to think about is the practicality of adhering to this feature in the appraisal process vis-a-vis your career goals. Realistically, presuming this is illegal, what do you propose doing—going to court? And spending a good part of your time, attention, and of course, money towards this issue?

Hope you got the point—at the end of the day, it's your call for the simple reason that it's your career. All the best.

Regards,
TS

Though the terms and conditions given in the contract after appraisal are not as per the law, as an HR professional, I believe that your company has taken the right steps to address the current attrition rate and prevent employees from taking undue advantage of the appraisal process.

Understanding Appraisal Clauses and Employee Concerns

Being an employee of a different department, it is quite evident that your concern is about losing a good opportunity that anybody would look forward to after appraisals.

However, looking at it from the company's point of view—contrary to the employees' concern—during appraisals, it is not only the performance of the last year that is considered, but also the business visibility of the individual's role in the coming year. Factors such as the individual's contribution, how it would benefit the organization in meeting its vision and mission in the coming year, ROI, and cost-effectiveness are key components that are taken into account. The performance of the previous year is just one factor in judging the employee's eligibility, but in reality, the company is interested in paying an incremented salary based on the employee's worth (the estimated output expected by the company in the coming year). This is why with increments come new KRAs and KPIs.

Regarding your query (irrespective of legality), the company can request employees to stay for 6 months after the appraisal, but reversing the appraisals is not an option at any cost. The HR department of the company must understand that joining and leaving are part and parcel of any organization. There are various other ways to reduce attrition, and this clause may only lead to increased disharmony among employees.

Regards,
Hiral

Thank you all for your wonderful comments. It really enlightened me. Though I am an employee who will personally suffer from this clause, I am more concerned about the unrest in my team due to such policies.

People leaving after appraisal is part and parcel of corporate life, as is exercised by all of us, including our HR friends. 

As I previously mentioned, the company has all the rights to take steps to prevent attrition. But I am having a tough time explaining to HR that the mentioned clause will do more harm to the organization than to the employees.

1. "Amount appraised shall be reversed during full and final settlement." The appraised amount would be in a few thousands, applicable for up to 6 months, not a significant amount the company can recover, but it sends immense negative vibes to employees and creates a headache for the finance team in terms of taxation.

2. "The appraisal shall stand cancelled." For example, a person who has moved from the role of Software Engineer to Sr. Software Engineer will be demoted, and his relieving letter will mention "Software Engineer." How many of us will buy this?

I believe that motivation, growth plans, and respect are more important factors than monetary benefits for any employee. That's the key to fighting attrition.

"Employee Is Like Sand, The More You Try To Grip with such policies, The More It Falls Away."

Sateesh, Abhishek 555, Hiral, thanks a ton for your inputs. Thanks for clarifying my doubts and correcting me.

Cheers,

Abhishek