Dear Sari Pavani,
Has the employee been removed on the grounds of poor performance? If yes, then what efforts your management had done to elevate his performance? Was he given sufficient warning for his poor performance? However, if the employee has been already been removed then it is binding on management to pay him this legal dues.
If it is on the grounds of indiscipline then it is important to terminate an employee by following the principles of natural justice and close the file. Once you do that you do not have to waste your time in settling past issues.
Management enjoys enormous legitimate powers at their disposal and they fall prey to the temptation of the on spot dismissal. However, large number of times, the aggrieved employees have gone to the labour courts and won the cases. Companies had to reinstate employee with back wages.
When you remove someone on the grounds of misconduct, it is important to conduct the domestic enquiry, award the suitable punishment. If the person is terminated then also it is important to complete "Full and Final Settlement" process. Withholding payment may satisfy ego of management but it is illegal too.
For Umesh: - You have given short but perfect reply. Thank you very much.
Thanks,
Dinesh V Divekar