How Can I Ensure My Performance Bonus if My Company Wants to End My Notice Period Early?

Hi all, I need help. I have resigned from my current position, and my resignation was accepted by the company. I have a 3-month notice period and will not be working any further. Hence, I do not have a job in hand. I submitted my resignation on January 13 so that I would be relieved by March 31.

Now, my company wants to relieve me in February, even after giving me an acceptance letter confirming that my last date will be considered as March 31. The reason they want to do this is that if I complete my tenure until March 31, the company is liable to pay me my annual performance bonus, which is an extremely significant amount.

Please suggest how I can ensure I receive my performance bonus, which is also a part of the CTC.

Regards.

As you explained, you have received a letter confirming that your last date will be 31st March 2013. So, if the company wants you to be relieved on 13th February, it's not your fault. You are still entitled to receive all your employee benefits, which must be applicable until 31st March 2013. You should confirm this with your HR. Hopefully, they will be supportive of your issue.

Regards,
Prabhat
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Thank you for your response. I will certainly speak to HR, but in case the situation goes beyond control, I need to understand if legally, I can demand all my benefits that I am eligible for until 31st March 2013.

Regards

If the company wants to relieve you on 13th Feb, you are still eligible to receive the performance bonus at least until 13th Feb 2013. The only challenge will be following up with your manager (to give proper rating/feedback to HR) and HR to get the bonus amount with FnF or as per the cycle. You can also consider legal action if you do not receive it.

Regards

To focus on the notice period, please check your appointment letter. If there is a clause regarding notice period payment by either party, then you shall be eligible for notice period payment.

Regards,
Manohar

Adhering to Appointment Letter Terms

Any company is bound to adhere to the terms and conditions of the appointment letter. If a three-month notice is required as per the terms and conditions, then you are eligible for all benefits as the company is relieving you early. If the company is well-managed professionally, then there should be no problem; otherwise, you must speak to your higher authority before any final statement is prepared. It is better to settle it in your presence and avoid litigation.

Regards

What are the terms and conditions for a bonus? Please check that carefully. The company cannot relieve you before your notice period unless they pay you the remaining amount. An organization can terminate the services for disciplinary cases and non-performance or underperformance during the notice period. Was anything related to that mentioned to you while accepting your resignation? If they haven't given you anything in writing about these terms, then they can't take any action.

Also, in the Bonus clause, see if it's mentioned that if you resign before the completion of the year, then the bonus may not be paid. If it's mentioned, then the company won't pay you the bonus. Please check all those terms and conditions and discuss with the HR Manager.

First of all, tell me, dear anonymous, what made you quit in a hurry without checking all these issues beforehand? Instead of posting this query and engaging in clarifications, you could have addressed these issues before resigning. What led you to make such a decision, especially when you mention not having another job lined up? The saying goes: "Don't change horses midstream!" You should have considered the consequences, the aftermath of your decisions, and then proceeded to resign. You could have delayed your decision and submitted your resignation effective from the 30th of April. You could have utilized this notice period to secure a new job, finalize the details, and then submit your resignation. By doing so, you could have alleviated a lot of stress and worry for yourself!

Youngsters (I assume you are one!) these days are often in a rush. Making hasty decisions can lead to regret later on. We are witnessing many similar issues like these on Cite HR almost every day!

Since they have released you on a prior date despite accepting your notice, you shall be entitled to all retirement benefits along with notice pay. However, notice pay will be payable for the difference between the date of release as per your notice and the actual date of release, subject to the relevant provisions in their service rules.

Please go through the termination clause and bonus clause. Most of the bonus clauses will state: If an employee resigns, gives notice of termination, or his/her employment terminates with the company for any reason (whether voluntarily or involuntarily) prior to the date a bonus payment is made, the employee will not be eligible to receive any payment under the bonus clause of the company.

If your company policy states the above clause, then you would not be eligible for a bonus payment because the target date is 31st March 2013, and you have resigned in January 2013 itself. Hence, I would suggest you go through the clause clearly.

Regarding the Notice Period

If the clause states that termination on either side by notice or payment in lieu, then you would be eligible for notice period pay for the remaining days.

These are my suggestions and thoughts.

Thanks and regards,

Srinivas Marnade

First and foremost, it is never advisable to quit your job unless you have another one lined up. If you do so, you are reducing your market value.

Are you working with a BPO or a multinational? This kind of practice is normally followed by BPOs and multinationals that do not adhere to Indian Employment Regulations. If your bonus entitlement specifies that you are eligible for a bonus only if you continue to work until 31st March, then you may face an issue. By requesting a relieving date of 13th March, you are not fulfilling the contract, and the company is not obligated to pay your bonus.

As far as I know, if an employee resigns, the company has the right to relieve the employee even after confirming the date of relieving. However, this will be done subject to the payment of his/her full dues until the mentioned relieving date in the resignation and acceptance. This implies that you will not be attending the office but will receive your salary and eligible dues.

I would suggest talking to your HOD, gaining his trust, explaining the issues, and asking him to recommend full payment based on your performance record to date. Alternatively, you could consider compromising and accepting a reduced bonus amount.

Lastly, never quit a job until you have a good, new, and secured job in hand.

Wishing you all the best,

Regards, Archana Bhatt

Entitlement to Bonus for Eligible Employees

If you are an eligible employee and have worked for more than 30 days during the financial year, you are certainly entitled to receive a bonus for that financial year. The reason is that it is a statutory liability and cannot be deprived from an employee by making any contradictory provisions in the service rules of the company. Moreover, if there is any conflict between the statute and the service rules of the company, then the former will prevail. It is immaterial whether the bonus was declared prior to or subsequent to your release order. If it is not paid, you can challenge it before the court.

I have gone through all the opinions on both issues, i.e., the notice period and the eligibility for the performance pay. I am sorry to say that on the first issue, I have an entirely different opinion.

Notice Period and Termination

It is relevant to refer to the relevant clauses in the offer of appointment. In all probabilities, it states that either party may terminate the contract of employment by giving one/three months' notice or salary in lieu thereof. If an employee decides to terminate such an employment contract, they have to give a notice of termination of the contract of employment (resignation) and serve for the period of notice or deposit the salary in lieu thereof. Why is such a provision necessary? This period is required to be given to the employer to make alternative arrangements so that in the absence of the resigning employee, the business does not get adversely affected.

Likewise, when the termination of the contract of employment is initiated by the employer, they are bound to give a notice of termination with a notice period (of one/three months). Why is this period given by the employer? This period will be utilized by the employee to find another employment.

Now, in light of the above, it would be evident that in the case of resignation by the employee (termination of the contract of employment), it will be the right of the employer to get three months' notice. However, if the employer is in a position to relieve you before three months, you cannot force them to continue until the expiry of three months. In fact, the employer in such a case may relieve you on any day during the period of notice.

Performance Pay Eligibility

On the second issue, I agree with the opinion of Mr. Srinivas Marnade to a certain extent; however, there is still some possibility to get your performance pay on a pro-rata basis for the period you served, provided you are ready to challenge the arbitrary policy on the subject made by the employer.

Regards

The concern raised by Mr. Jha must be appreciated. The logic for the termination of employment contracts (from either side) is 100% correct. However, concerning payment terms, even if the employer wishes to relieve the employee before the end of his/her notice period, it is the employer's liability to pay the complete amount, i.e., salary till the notice period, bonus, LTA, Medical Claim, Unpaid Leave, etc., with his F & F Settlement.

Understanding the Notice Period

We must understand why the notice period is required in the case of termination of employment contracts (from either side) and whether salary and other benefits should be paid to the employee in such cases; both are different issues.

Employee Benefits Calculation

For employees' benefits (other than salary), everything must be calculated assuming the relieving date (as per the notice period) as the last working day of the employee, even if the employer does not require his/her services till the last day of the notice period.

This is what I have stated based on my knowledge and experience. I would be grateful if someone could provide me with written statutory evidence regarding such issues.

Regards,
Prabhat

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Termination of Employment Contract

Termination of an employment contract can be initiated by either party, i.e., the employer or the employee, subject to compliance with the termination clause contained in the said contract. If there is a provision to terminate the contract at any time by either party by serving 3 months' notice or 3 months' pay in lieu thereof, then the employer/employee has to comply with the same. However, it is fully at the discretion of the employer to waive the notice period.

In view of the above, if the employee has served a notice and the employer has accepted the same, then in the case of releasing him before the date specified in the notice, the employer has to pay him for the premature termination.

As far as the bonus is concerned, you will have to check the HR policy on the same. However, as far as the date of relieving is concerned, the company has the right to relieve you earlier since you are the one who has given notice to the company. Similarly, if the company gives you notice, they will have to give you a three months' notice, but you have the right to leave earlier if you so desire. The company gives you time so that you can plan your resettlement, and the individual gives notice so that the company can plan your reliever.

For the bonus, go through the company policy on bonuses where there would be a cut-off date for the bonus or a minimum period to be served in a year when the bonus becomes due. So, quote the policy and ask for your bonus. The company can reduce your bonus on a pro-rata basis at most.

Have a nice day.

Regards, Manoj

Discussion on Notice Period and Performance Pay

Dear jhadevbrat,

I differ with your contention that it will be the right of the employer to relieve before three months. This is only acceptable in case the employer pays the notice pay for the remaining period of the notice, i.e., 3 months. This matter has also been discussed several times on this forum. Irrespective of whether your company practices this, it cannot be termed fair or legal. Otherwise, companies will keep having a longer notice period (say six months or 1 year), and whenever an employee puts up a resignation notice, they can relieve that employee without pay!

The best way to understand such unfairness is to view things from the other side; having empathy, i.e., put oneself in the place of the employee. Then the matter will become crystal clear.

Warm regards.

Once again, we are mistaken in understanding the primary issue. As HR professionals, we should be specific and to the point. I do agree with what you have stated in favor of the right of termination of the employment agreement, followed by the relieving of the employee (by either party). However, regarding the payment terms, it is obligatory for both sides to pay the complete notice period amount, along with all other statutory benefits.

Regards,
Prabhat

Entitlement to Full Notice Period Compensation

Since the company wants you to leave earlier by a month, SMILE! You are entitled to collect the salary and other dues for the full notice period—i.e., 3 months. Take that money, go on a honeymoon, or start looking for another job without any professional commitments.

Regards

Understanding Notice Period Obligations

If I want to leave a company, the company legally requires three months (or whatever was stated in the offer letter) notice. Since I am the one submitting the resignation, I do not need the notice period. Hence, the onus lies on the company when it relieves you.

Similarly, if the company gives you notice, the onus is on you to accept the notice. You may decide to leave before the notice period. Since the company has given the notice, it may pay you for the notice period. Similarly, if I give the notice, I may pay for the notice and leave early.

A different situation to understand who is giving notice to whom: in the disciplinary process, I am served a notice by the company to reply within 15 days, but I may choose to reply in 1 day. The time period for the next step starts from the day of my submission of the reply, not the original notice period. That was for my benefit, which I choose not to avail (here it is my wish, since I am the recipient).

Regards, Manoj [Phone Number Removed For Privacy Reasons]

Any contract, whether an employment contract or otherwise, is to be regulated by the Law of Contract, which provides equal rights and responsibilities for both parties in a two-party agreement.

In the instant case, it is the employee's decision to terminate the contract, and as a result, the employer is adversely impacted. If the contract requires both parties to give three months' notice (or salary in lieu thereof) and the employee wishes to be relieved after only one month, subject to the employer's acceptance, the employee may be relieved after one month but must deposit two months' salary. The employee always has the option to buy out their notice period.

Similarly, when the employer decides to terminate the contract, it is their responsibility to give three months' notice (or salary in lieu thereof). Like the employee, the employer also has the right to buy out the notice period if desired and by paying three months' salary, may relieve the employee immediately.

Therefore, the employer is only required to pay salary when it is their decision to terminate the contract, not when the employee resigns. The law does not and cannot provide for either party to cause inconvenience to the other party and at the same time get compensated as well.

When you read both of your paragraphs, it is exactly what I meant.

If the notice period is 3 months on either side, and an employee gives a notice of 3 months, he has complied with his side of the contract. The employee may have made all his arrangements for taking up another means of livelihood. The company now has 3 months to find or train a replacement. If they need more time, they may ask the employee to continue, which the employee may or may not accept.

In case the company finds a replacement or does not require the services of the employee from the very next day, they can relieve the employee immediately. However, since they have received due notice and are also bound by the 3-month notice clause in the contract, they are equally liable to pay out the notice salary if they want the employee out before 3 months.

An employee giving notice of resignation does not empower the company to deny him the notice period or notice pay by resorting to the excuse that he has given notice first. The only exception can be a mutual understanding where the employee accepts to be relieved earlier, just as many companies waive the notice pay upon request.

I hope the matter is clear. If not, then I shall again request that instead of viewing it from just the employer's side, one should place himself in the employee's shoes and think about how one will feel if, complying with the terms, one puts up a notice of 3 months, and the employer terminates his service the next day without giving any salary in lieu (thus depriving him of a salary for months as well as making him unemployed during that period).

This is the reason that companies do not have longer notice periods. Otherwise, what stops a company from having a notice period of years to prevent attrition?

Warm regards.

Dear Mr. Raj Kumar,

I really enjoy academic and professional discussions. Let me clarify that I am not viewing from the employer's side only. I am, in fact, keeping the spirit of the contract as well as provisions of the Law of Contract into consideration, which is based primarily on the principles of equity and justice. I have a total of more than 23 years of experience handling employee relations issues of a very large Central Government organization having 35,000 employees, with 10 very strong recognized unions.

Let me take another opportunity to convey my point of view.

By virtue of the clause in the offer of appointment (three months' notice by either party or salary in lieu thereof), any party willing to terminate the contract is legally responsible/bound to give three months' advance notice (or salary in place of the notice period). In other words, the other party has a legal right to receive either notice or salary in lieu thereof.

Now, in a situation where an employee resigns, in discharge of his legal responsibility contained in his contract of employment, he will have to give three months' notice (offer himself to serve for three months) or deposit three months' salary (if he is willing to quit forthwith). The employer (who has the legal right to receive such notice from a resigning employee) in such a situation may have the discretion to either accept the services offered by the employee for three months or waive him from such responsibility and allow him to quit forthwith. Serving during the notice period by a resigning employee is, in fact, his legal responsibility and a necessary condition for terminating the contract rather than his right. This may please be understood in the right perspective.

Likewise, when an employment contract is intended to be terminated by the employer, it is his legal responsibility, a necessary and essential condition (by virtue of the termination clause in the agreement) to give three months' notice or salary in lieu of notice. In this case, it is the legal right of the employee to get such notice or salary in lieu thereof, whatever the employer is willing to offer. The employer cannot remove an employee unless he gives three months' notice (allows the employee to serve for three months) or pays the salary for the notice period.

The above analysis is totally based on the principles of equality, equity, and justice, and both the employer's and employee's perspectives have been considered.

I hope the above clarifies my contention.

Regards

I agree with what Mr. Raj Kumar has stated above. An HR professional is not meant to treat himself or be treated as a second employer. Every HR professional should understand their roles and responsibilities; they must be specific to the particular point.

Understanding Notice Period and Benefits

In my earlier responses, I have requested everyone to understand the difference between:

1. "Why the notice period is required in case of termination of employment contract (from either side)" and
2. "Whether salary and other benefits should be paid to the employee or not in any such cases."

Again, I would like to request the same.

Friend Manoj, what I have observed in this discussion is that most people are considering the first point only. You must agree that any employment contract is governed by labor and statutory laws.

I hope this aspect is clear now. This forum is for discussion, and everyone's concerns should be welcomed and appreciated.

Regards,
Prabhat

I still consider myself a learner and young, even though I find that I have far more and longer experience than your 23 years in a Maharatna PSU with more employees than you quoted. Each unit of the organization has city-sized townships attached to its plants and more unions than you mentioned. I hope, being an experienced person, you can guess and comprehend the complete picture.

However, let this not be taken into consideration, and I seldom mention this, for I do not wish to be known as "old," with rigid ideas and unable to see the other side of any argument or concept. Anyway, I have put forth my opinion, and I do not wish to "personalize" this issue. There are several sayings, full of wisdom, against arguing with others, and I subscribe to those pearls of wisdom.

In any case, I agree with whatever you say, as it may be in the terms and conditions of your company. I also know for a fact that many small family-run outfits, registered as companies, routinely engage in such exploitative practices to save money. They also indulge in bifurcating the minimum wages to reduce their contribution to P.F. They do not give gratuity if an employee does not complete more than 5 calendar years in service; they club all the weekly offs or holidays during, before, or after the leave period, thus depleting the employee's leave balance, etc.

However, what we are discussing here are the best practices, which are "not bad" in the eyes of the law and natural justice and can stand the scrutiny of a court of law as being fair to the employee and impartial.

I shall once again quote from you to convey what I intend to:

"By virtue of the clause in the offer of appointment (three months' notice by either party or salary in lieu thereof), any party willing to terminate the contract is legally responsible/bound to give three months' advance notice (or salary in place of notice period). In other words, the other party has a legal right to receive either notice or salary in lieu thereof."

Likewise, when an employment contract is intended to be terminated by the employer, it is his legal responsibility, necessary and essential condition (by virtue of the termination clause in the agreement) to give three months' notice or salary in lieu of notice. In this case, it is the legal right of the employee to get such notice or salary in lieu thereof, whatever the employer is willing to offer. The employer cannot remove an employee unless either he gives three months' notice (allows the employee to serve for three months) or pays salary for the notice period.

Please understand that the moment the employer decides to remove an employee (earlier than the agreed-upon notice period of 3 months), on its own, suo moto, without the willing consent of the employee, your paragraph becomes effective - The employer cannot remove an employee unless either he gives three months' notice (allows the employee to serve for three months) or pays salary for the notice period.

This is what I intended to convey! The employer can send him packing the next day, but in that case, it also becomes his liability to pay the notice pay.

Warm regards.

Thanks for your response. I appreciate your views and concern.

Employee Notice Period and Employer Obligations

- The employee conforms to the contract and gives 3 months' notice.
- If he wanted to be released earlier, he could have indicated so and accepted liability to pay notice salary.
- The ball is now in the employer's court.
- The employer, as per the contract, is bound to accept the condition of taking work from him and paying him salary for 3 months.
- Now, the employer does not want the employee around anymore.
- Irrespective of whether the employee gives resignation or not, at any point in the career of the employee, if the employer wants, he can always release/relieve him by giving 3 months' notice or notice-pay.
- Now, after the acceptance of resignation, either the employer should let the employee work for 3 months (as per the contract);
- Else, if suo moto, the employer wants to relieve him, then the employer is bound to pay 3 months' notice pay (or else let him work for 3 months).

Just because an employee has put in his resignation complying with the 3 months' notice period, why should he not be allowed to work with dignity for 3 more months?

If it irks the employer or otherwise, it still does not give the right to terminate the services immediately; and if the employer wants to do so, for its own convenience or wish, then it should pay the 3 months' notice-pay and terminate the services, i.e., release or relieve the employee.

It is as simple as that if one wants to be fair and just.

This is a simple issue and can be understood by anyone with an unbiased attitude.

I appreciate those who have understood the issue. In fact, in several threads during 2008 to 2010, this issue has been discussed, and even court judgments and case laws have been quoted.

Warm regards.

Thank you for your very enlightening advice. I have not become personal in my write-up, nor did I intend to. We may have a difference of opinion, but that does not matter. This forum provides all of us with the freedom of expression and the opportunity to learn, which is exactly what I am doing. My humble and sincere advice to you, as a senior HR professional (as claimed by you), is to please avoid getting personal, as you have in the above message to me.

I would actually be grateful to you if you could provide me with those Supreme/High Court Judgements that you referred to in your message to Shri Mishra. Specifically, where the honorable court has upheld your contention that in the case of an employee's resignation, if the employer does not require a notice period and is willing to exempt the employee from fulfilling this contractual obligation, allowing the employee to depart immediately, the employer would be liable to pay the salary for the notice period.

Thank you.