Legal Insight Needed: Can Employers Limit Subsistence Allowance to 50% During Enquiry?

Dear Seniors, If we add the clause in the Appointment Letter of the Workman that during domestic enquiry proceedings the Subsistence Allowance would be only 50% of (Gross Wages = Basic + DA + HRA + Other Allowances), then irrespective of the duration of the domestic enquiry proceedings, the employer would be liable to pay only 50% Subsistence Allowance. Is there any judgment regarding this?

Thanks in anticipation.

Dear Prashant,

Going by the apex court judgment, payment of subsistence allowance during the pendency of a domestic inquiry is unavoidable. Failure to do so would weaken our defense and could result in a judgment favoring the accused. You may refer to Capt. Paul Antony Vs. Bharat Gold Mines Ltd., settled by the Supreme Court about 10 years ago on this very issue, which is worth taking a cue from. I can post this judgment ASAP.

Kumar.s.

Here are the attachments relevant to the subject of suspension, inquiry, payment of subsistence allowance, etc., and a collection of some other comments, remarks, and opinions to enlighten the matter. An HR person who keeps referring to such materials as frequently as possible would become knowledgeable about the most important matters.

Regards,
Kumar S.

Subsistence Allowance During Extended Suspension

If the suspension is extended beyond 90 days, the employee should be given 75% of their pay. In some State Acts, such as the Kerala Payment of Subsistence Allowance Act, if the suspension is extended beyond 180 days, the employee should be paid 100% of the salary. Salary for all purposes shall include basic salary and dearness allowance. At the same time, if the extension of suspension is due to the non-cooperation of the suspended employee to appear for an inquiry, the allowance shall be withheld.

Regards,
Madhu.T.K

There are legal provisions that apply to cases where an employee is suspended pending an inquiry into charges leveled against him/her.

Moreover, why do you want to include such a clause in the appointment letter? It is best avoided. After all, instances of suspension are rather rare, and when they occur, the provisions of the law would automatically apply.

Regards,
Vasant Nair

First and foremost, I agree with Vasant. Why do you want to include a clause of subsistence allowance in the appointment letter, as the cases are very rare when you suspend a workman pending inquiry?

Secondly, the provisions of subsistence allowance are clearly defined, and whatever you put in the appointment letter will not hold good as the provisions you are mentioning are less favorable to the workman than specified in the law.

Regards,
Preetam Deshpande

It is well defined in the ID Act about the quantum of payment towards subsistence allowance when you put someone on "suspension pending inquiry." Whether you mention it in your appointment or not, this will automatically be applied. Mentioning the same in the appointment letter will be redundant and probably signal a negative message to a newcomer.

Focus on conveying positive aspects and the benefits available to the individual upon accepting the offer and the general terms of service in the appointment letter. Other details, such as the one you specified, can be outlined in the Standing Orders, which you can make him read and understand.

Regards,
V. Balaji

The ID Act is silent on subsistence allowance. It is the Standing Orders Act which makes subsistence allowance mandatory, as Madhu has pointed out. In establishments not covered by the Standing Orders Act, it is advisable to include it as a term of employment.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Dear Seniors,

If we add the clause in the Appointment Letter of the Workman that during domestic enquiry proceedings, the Subsistence Allowance would be only 50% of (Gross Wages = Basic + DA + HRA + Other Allowances), then irrespective of the duration of the domestic enquiry proceedings, the employer would be liable to pay only 50% Subsistence Allowance. Is there any judgment regarding this? Thanks in anticipation...

No, it is an established law that any provisions of the Act cannot be overruled by a mutual contract. Any contract contrary to the provisions of the Act will be considered null and void. If there is a provision to pay 75% of the wages after 90 days in the standing order Act, it cannot be legally sustainable if the amount is paid at 50% by a mutual contract.

Regards,
pkjain

Sorry, it is not the ID Act that defines the quantum of Subsistence Allowance. It is the Standing Orders that do so.

Regards,
Vasant Nair

I suggest issuing the appointment letter as per the attached draft, which follows the KISS formula. Always remember to keep it simple (KISS) - anywhere, anytime.

Thanks with regards,
Keshav Korgaonkar

Dear colleagues,

I hope this message finds you well. I would like to inquire whether it is possible to process the salary increment during the suspension period. Your clarification on this matter would be greatly appreciated.

Regards,
Sridhar Rajan

Dear Sridhar,

While an employee is under "suspension," he is eligible for "subsistence allowance." In what context are you proposing to pay an increment? Please elaborate on your proposal.

Employer-Employee Relationship During Suspension

During the suspension period, the employer-employee relationship remains intact. In the absence of any express order stating that the employee placed under suspension pending an inquiry is not entitled to any increment, he should be paid the increment due, and the subsistence allowance should be paid based on the increased salary. Obviously, the subsistence allowance is a percentage (50%, 75%, or 100%, as the case may be) of his pay, and once his pay is increased by the element of the increment given, the subsistence pay will also increase.

Performance-Based Increments

No doubt, if your increments are purely based on performance, you need not pay it. But if the employee is under a time scale with annual increments marked against each grade, he should be paid the increment.

In support of the above, there are a lot of court cases available. One case is attached for your reference.

Whether to deduct EPF, ESIC, and labor welfare from 50% of the subsistence allowance processed?

Subsistence allowance is an allowance paid to a worker for their survival during a suspension period when the worker is not on duty. Therefore, it will not come under the definition of wages under the EPF & MP Act, and no PF should be deducted from the amount paid. At the same time, since the employee is an insured person even though they are under suspension, the amount paid for their survival, i.e., the subsistence allowance, will attract ESI contribution.