How Can We Support an Employee's Financial Needs Without Risking Company Stability?

Ours is a small manufacturing company with a workforce of 50 employees. One of our old employees (with more than 5 years of service) wants to resign and then rejoin with a new appointment. His contention is that he needs money. This employee is the most experienced in his role, which required sustained training. Although we have doubts about him leaving our company, we have not been able to determine the truth.

We want to support him at face value but also want to safeguard the company's interests. How can we bring out the truth when he is not sharing his inner thoughts even during regular communication?

Actions to Prevent Employee Departure

What actions should we take to prevent him from leaving the company after receiving his dues? Your guidance on this matter would be greatly appreciated.

Thanks and Regards,
Chetna

Understanding Employee Resignation Motives

Is money the only reason for him to resign? If you truly want to retain him, consider announcing an incentive program for all employees with a good tenure. You could also discuss with management the possibility of offering a substantial raise to employees who are critical to running important tasks. Simply pleasing him with a hike or a bonus may demotivate other employees, so it's better to consider all employees rather than just focusing on him alone.

Evaluating Rejoining Intentions

Why does he want to join you back? Doesn't he have other opportunities elsewhere with his experience and knowledge? Is he targeting his gratuity? If so, I don't think it is that significant. Does your company offer any other benefits compared to your competitors? Reflect on this, and you might understand his motives.

Employee Transparency and Boundaries

No employee would be willing to give you the exact reason for moving out. Please do not expect anyone to disclose it, and you cannot expect that from the employee. Paying the employee does not give you the right to interfere in his decisions if he does not permit you to do so.

Thanks,

Priya

Thanks for your quick reply. Kindly suggest whether:

Is it legal to have him sign a bond for his continuation with the company?

Is it a common practice to use PF and gratuity in the said manner?

The market scenario is not great, and there is groupism and regionalism associated with this case. We are already paying the best in the industry with many benefits like uniforms, meals, and other employee benefit schemes.

Your valued feedback is greatly appreciated.

Regards

What are the qualifications of the employee, their age, years of service with you, salary, current designation, role, responsibilities, and any other designation? Please share more inputs to help in decision-making.

Qualifications and Employee Details Needed

What are the qualifications of the employee, age, years of service with you, salary, current designation, role, responsibilities, and designation? Please share to provide more inputs to make a decision.

He may be offered a loan, interest-free or at a minimum interest rate, from the company to meet his requirements.

Interest-Free Loan Consideration

The company is considering offering him an interest-free loan. The employee in question has just finished paying off his earlier loan. It has been our company policy to support our workers, as most of them come from rural backgrounds and may not be educated enough.

However, sometimes it seems that they have taken this support for granted and show resentment by not working efficiently if it is denied (though this is only the case in a few instances). The employee in question is a graduate and has been working with a simple design software. His salary is quite generous compared to his responsibilities and the market. We have been developing and supporting him throughout his five years with us, and he has been performing well during this time.

Recently, a few of his friends have left the company and joined elsewhere. His performance over the past six months has not been satisfactory, possibly due to family issues. Could a bond or legal note be created when providing him with a loan? How can the company's interests be safeguarded in resolving this matter?

Regards

Loan Adjustment and Employee Appraisal

An undertaking should be taken from him that the loan money will be adjusted against his gratuity or salary in case he is unable to liquidate it prior to leaving the company or retiring. Furthermore, he can be appraised to improve efficiency post-loan sanction, helping to solve his financial problems.

Subject: Re: Employee Wants to Resign and Then Rejoin to Encash His PF and Gratuity Dues

Financial worries may cause problems in performance. Provide him with financial support (loan) and start deducting a monthly installment against the financial help. This will help him realize that you have assisted him. Also, issue him an expectation letter where you can mention his best performance required for the company. I hope this will enhance his performance.

Regards,
SDP

Understanding Employee Loan Requests and PF Withdrawals

It is usually observed that employees facing financial problems approach with a loan request. In this case, a request for PF withdrawal may indicate that the employee is either planning to join your direct competitor or start out on his own. To this end, he might be trying to circumvent the possibility of the organization delaying his PF transfer or withdrawal, as the case may be.

The best option would be to counsel the employee to understand his real issue. Offer him an interest-free loan with agreed deductions from salary and other dues accrued.

An employer has to extend financial help to a needy employee, but if the intention of the employee is to leave the company, one cannot stop him. Of course, the inner view of the employee can be known through indirect inquiry from coworkers close to him. Allowing resignation and rejoining of an employee is not a healthy practice for the organization. Sanctioning a 'Special loan' and adopting recovery methods can be beneficial. This practical view has been experienced and may be helpful to some extent.

Best wishes,
Eswararao Ivaturi

I assume your company has already made a certain decision. However, to have a comprehensive discussion, I will provide a different perspective.

1. An employee resigning will be eligible to withdraw his PF after 2 months. He can't apply for it immediately as the department needs to verify that he is not going to work elsewhere. I am not sure if this is a rule or a general practice followed by the department.

2. If he rejoins, you must inform the PF department about his return. Unless he has already withdrawn his PF (which could take up to 6 months), you will have to assign the same number. If a different number is provided, you must request the transfer of his existing balance from the previous account. Once this is done, his PF withdrawal will cease.

3. How long of a salary gap is he willing to endure? It seems someone may have misled him regarding using PF and gratuity to meet his financial obligations, requirements, or even for investment elsewhere.

4. Providing a loan is an option, but there are risks associated with this approach. The employee may abscond with the outstanding loan amount. Additionally, please note that as per the Payment of Wages Act, a loan cannot exceed 4 months' salary (referred to as an advance in the act). Granting loans should not become a routine practice. Breaking such a habit can be challenging.

Regards