Retention - Salary Not Given

Hi
Im deducting five days salary as per the annual ctc every month for 6 months in order to retain the employees and this amount will be given after three years of service or if they intimate before leaving within the notice period after separation. But some employees are asking not to deduct. Can you please suggest. Is it okay.

Dear Member
Are you deducting it from the monthly salary payable and under what Head ?
Please remember that any deductions not duly authorised by the employee or not deductible under statutory provisions (e.g. PF, ESI, Income Tax, Labour Welfare Fund etc. ) is illegal and stop it immediately.
You can use other retention technique like Retention Bonus, Long Service Awards, etc.
Regards
Preetam Deshpande

Hi Preetam
Im deducting 5days salary as per the annual package for ex if the ctc is 200000 then 2740 is getting deducted for 6mths so as to keep one month salary with the company.

In stead of deductiong salary, you can set aside a portion of CTC as retention Bonus while issuing the appointment letter itself. e.g. an employee is hired for Rs 10L CTC, towards Retention Bonus Rs.1L may be kept aside which can be paid after completion of one year service or so. In this way, the dissent can be avoided.
Pon

Can you plz elaborate on this? Means process of communication and deduction.
Are there any other alternatives?
Our actual intention is to retain the employees for a long term and utilize this money during any emergency requirements of the employee (could be during the employment or during the gap between the new employment).

Hello Anupama,

Like Preetam Deshpande mentioned, this practice isn't legal & COULD land your company into legal trouble IF anyone goes to the court. Like many small IT companies in Andhra Pradesh who use this practice for retention, you also may not be paying any interest over the deducted amount--whatever be the quantum [I know some companies do pay interest]. Pl note that I am NOT disputing your intent here--only the 'HOW' part.

Like Pon suggested, try to include this within the Appointment Letter itself in the form of Retention Bonus. To explain, suppose a hiree wants a CTC of 6 L p.a., you can negotiate for 5.5 L for the monthly payout in form of salary AND 50K to be payable after 6 months or 1 year as Retention Bonus--whatever duration you have in mind. If the employee leaves before that period, then he/she stands to loose it--which will have to be mentioned clearly in the Offer/Appointment Letter. This is what Pon meant. That way, you neither have to make any deductions--complicating matters--and also maintain cordial relations with the employees. However, pl note that, like every step/measure in HR, this too has it's own set of downsides. You need to be on the watch around the time when the employee gets the Bonus--chances of an employee quitting AFTER taking the Bonus COULD be there. And, pl ensure the Bonus IS PAID WITHOUT DELAY as soon as it's due--many companies which have the Retention Bonus scheme delay this payment leading to unwarranted HR situations.

All said & done, there's no replacement for long-term Good HR Practices--which minimize such situations. But if you are looking for an ideal situation that NO employee will LEAVE, those days are gone.

All the Best.

Rgds,

TS

Dear Anupama,
An employee cannot be retained with this kind of policy. well said by others, if the same is not done with the consent of the both(employee- employer) can put ur company into trouble.
An employee can retained if he /she feels that they are not chicken fed or if they are satisfied with their work culture and the profile they are holding. one thing i must say that all the policies must be transparent and should be clear to each n every employee.
Good luck!