Is It Legal for My Company to Demand Incentive Payback After Resignation? Seeking Advice!

Legal Concerns Regarding Resignation and Incentives

I am working in a leading consulting firm (Manpower Consulting) in Bangalore and have been with them since 2010. Recently, when I resigned from my company, the management officials informed me that I have to pay one lakh rupees; only then will I receive my experience and relieving letter.

Is it legal for a company to demand the return of incentives paid for performance when an employee resigns?

Kindly find the detailed explanation below regarding the one lakh rupees they are asking from me.

We worked and hired approximately 11 members for a technology software startup company from 2010 until early 2012, and that tech company is liable to pay approximately 19 lakh rupees for the same.

Complaints and Mistakes

1. The tech company has not paid even a single rupee to my company on the 19 lakh rupees approximately.

2. My current company has not received the signed contract copy from the client company.

3. All the candidates we hired during the period are still working. Typically, there is a clause that if a hired employee leaves the client within 3 to 6 months, the consulting firm has to pay the money back or provide a replacement free of cost. In this case, all the employees hired are still working, and to make matters worse, they have not paid any amount.

4. The company threatens me that if I don't pay back the money (1 lakh, which I received as an incentive for the hiring process), I will not be relieved. Even if I force them, they will not provide me with experience and relieving letters, and in the worst case, they can terminate me by giving any reason.

5. I officially resigned two days ago, and my manager accepted the resignation via email and confirmed it. Only then did this problem start.

6. I am being harassed by the management for the same.

Dear members, seniors, and experts, kindly help me. I feel this is very unethical to trap an employee like this. Please provide me with a solution. If you need more information, please ask; I am ready to provide it as soon as possible.

Thanks & Regards,

Sarathy

Please be a little bit clearer:
1. Is the tech company (client) specifying whether the lead was generated by you or someone else?
2. How did your company work for your client without receiving the signed agreement copy?

If you are not related to the above two points, your company cannot ask you to repay the incentives given. You did your job, and the company paid an incentive for your work. The dispute between the two companies should be resolved by both respective managements. They should not involve employees in between.

Thanks & Regards,
Srilakshmi Korukonda

From the information you have given, there are two scenarios at play.

If the tech company had not signed the contract, then why did your company supply candidates? This is your company's problem and not yours. While there may not be a signed contract, there is a verbal contract, evidenced by the fact that candidates were supplied. The only course of action is through the courts, and your company must decide if it is economically viable to do so.

The second scenario concerns you. If you have resigned, then you cannot be terminated. If an incentive payment was made to you due to your performance and you delivered, then the payment is yours to keep.

Therefore, I can see two courses of action that you can take:

1. Send the company a legal letter threatening to take them to court; this letter should come from a lawyer. As your company has taken no action against the tech company, it is unlikely that they will pursue this through the courts, either, and the matter can be concluded.

2. I assume you have all documentary evidence of what you say. In which case, you may wish to consider simply walking away from this company and producing the evidence for any new employer to support the reasons why you do not have the release or experience letters.

I hope the above helps, and I am sure other members will give their views. May I take this opportunity to thank you for your post as it is a reminder to all of the value of a signed contract.

Regards,
Harsh

As an employee, you have no consequence if the client does not make a payment to your organization, unless you have signed the contract with the client and initiated the hiring process for them. As an employee of the recruitment firm, you have merely executed the assignments assigned to you by the organization and have been rewarded accordingly. This scenario differs from making sales and receiving incentives. You do not need to take any action to recover the money from the client; it is clearly the responsibility of the individual who decided to commence hiring for the so-called client.

You may send a resignation letter once again via registered post with acknowledgment and request a proper relieving letter. In case of any pressure tactics by the management, seek legal advice.

Kind regards,
Dayanand L. Guddin

Harsh has given you very realistic and practical suggestions. However, even though he suggested two options that you have – either/or options – I would suggest you implement both of them simultaneously for two different reasons.

First Plan of Action (PoA)

The first PoA, sending a lawyer notice regarding the intent to initiate legal proceedings, would ensure your company will be on the back foot and at least stop their pestering you. If that continues, your lawyer should be able to handle it.

Second Plan of Action (PoA)

The second PoA would ensure you delink your joining the new company with the action you are contemplating with the present company.

But please ensure you have written proof that they asked for the incentive back – in whatever form. If you don't already have it, try different ways of making them commit in writing.

All the best.

Regards,
TS

Dear Srilakshmi, kindly find answers to your questions below:

1. Is the tech company (client) specified the lead generated by you or someone else?

That was a lead generated by my company, and I led the team to work for the client as an Assistant Manager with a 3-member team.

2. How did your company work for your client without receiving the signed agreement copy?

They both agreed to the contract, and a legal contract was sent to the tech company. However, the person in charge from my company failed to get it signed and returned. This issue came to light only when the company intended to take legal action against the tech company. They are now trying to collect as much as possible from the employees. A similar situation occurred with another employee who left and joined a company through a third party without any problems, as the third party agreed to the situation. However, with my 3 years of experience, it could pose a problem for my career if I leave abruptly.

Kindly let me know your inputs.

Thanks,

Sarathy

Thank you so much for the reply. For your questions, kindly find the answers below:

They both agreed to the contract, and a legal agreement was sent to the tech company. However, the person in charge from my company failed to have it signed and returned. The company only became aware of this when they considered taking legal action against the tech company. As a result, they are now trying to collect as much as possible from the employees.

The company is 20 years old, with multiple branches across major cities in India, and is financially strong.

Regarding the documents, are you referring to my resignation email and the response I received? If so, I have them saved in my email and have also stored them as screenshots in the system to prevent any potential conflicts in the future.

I have answered a few other questions as well. Please review them and share your feedback.

Thanks,
Sarathy

Thank you for your reply. When they came and told me this, I asked them for a few days to think about it and reply. I did not agree to pay or comment on anything except asking for time. As I regularly read the cases here on Cite HR, I thought I should seek some valuable suggestions before taking any steps. As you suggested, I also plan to ask them for a written email from the right and concerned authority. Once I fully understand the procedures and processes, I will discuss with my company and request a written letter or email for the same.

Additionally, I have responded to a few other questions raised by other members regarding my request. Please go through them and let me know your input.

Thank you.

Regards,
Sarathy

In my view, your company asking for a refund of the incentive paid earlier is completely wrong. They cannot insist; rather, you can insist on them providing proper documentation and relieving you. With all due respect, please ensure to collect the document on which the incentive was based. This will serve as substantial proof for you to establish that the company had indeed paid you an incentive.

As mentioned by our friends, the issue is between both companies, and you are not involved. If the client was generated by you and it is understood that without a signed contract between both companies, you provided the manpower, then you may be questioned about procedural defects. However, the company cannot demand a refund of the incentive from you.

I may be wrong in my posting, but this is my thought process and seniors can correct me. Generally, incentive programs and bonuses are tied to certain clauses. If your company has an incentive policy, please go through the clauses completely and act accordingly. Certain clauses may state that after receiving the incentive or bonus, you should work for a certain period. If not, then the clause may state that the said amount should be paid back to the company. So, as mentioned, I would suggest going through the policy. If there is no policy around the incentive or bonus plan, then the company has no rights to ask for a refund.

Thanks and Regards,
Srinivas Marnade