Can Employers Legally Deduct from a Fixed Salary for Missing Targets? Seeking Advice

I just want to understand if any company may deduct any amount from a fixed salary for non-performance or any other reason. To be specific, the director of our company emailed us in the middle of last month that our salaries would be deducted if we don't reach a specified target. Please suggest if any employer can get away with this when the appointment/increment letter states a certain fixed salary per month.

Regards,
A

I just want to understand if any company may deduct any amount from a fixed salary for non-performance or any other reason. To be specific, the director of our company emailed us in the middle of last month that our salaries would be deducted if we don't reach a specified target. Please suggest if any employer can get away with this when the appointment/increment letter states a certain fixed salary per month.

Regards,
A

I don't think performance-based deductions are allowed from fixed components. We divide salary into fixed and variable components. The variable component is given based on the employee's performance, so if they perform their best, they receive 100% of the variable component. If they don't perform, they receive 0% or a percentage based on the work/target achieved by them.

Many companies set a target as a milestone, and the higher the milestone achieved by a person, the higher the incentives they receive. Unless your appointment letter states "Performance-based pay" and includes it in your declared salary, the company cannot deduct the said amount (as per the ratio they communicated) from your salary.

Hope this clears your doubts. Awaiting more replies and clarifications from seniors.

Thank you for your response. The amount is deducted from my fixed salary and not from the variable component. As I mentioned earlier, in the middle of last month, a mailer was sent to all Sales Team members from the Director stating that half of our salary would be deducted if we don't achieve a certain target. They indeed implemented this deduction.

In this situation, I am left with no option but to resign. However, how can I justify this deduction to my next employer? There is a notice period of 2 months, and I have discovered that even though it's mentioned in the appointment letter that the Full and Final (F&F) settlement should be done within 45 days, it is never done on time. Moreover, they always deduct some amount during the settlement process, even after numerous follow-ups.

Can Companies Get Away with Such Deductions?

Can any company get away with such deductions? It seems they have done similar things to others in the past. Do they not fall under any rules or guidelines? As an employee, are we powerless to do anything and just remain helpless?

It seems you're working for a small enterprise or private firm that is very money-oriented. I understand that when a firm is newly established, it becomes difficult to manage money outflow when there's no inflow or income. However, whatever they are doing is not justified.

As I mentioned, if they are deducting any amount from the declared or prescribed variable pay or performance-linked pay, it is not questionable. But here, you can question on what grounds they have deducted the salary.

Secondly, you mentioned that they communicated this over an email. I assume they did not put it up on the notice board.

Can you share the components of your salary as mentioned in your appointment letter?

Next, do you get salary slips for your salary? If you don't, seek one. Kindly note that increasingly, firms are practicing depositing the salary directly into a bank account so that employees don't have to deal with the hassle of going to the bank to deposit cash or cheque.

However, this doesn't give them the right to discount the salary slip. You can demand it, and they are liable to provide you with salary slips.

Once you get the salary slip, kindly mention the salary components listed in the slip as well, and if deductions are mentioned in the salary slip, under what headings.

Regards

Thank you for your response. I am awaiting my salary slip. I will share the details mentioned in my appointment letter along with the salary slip details. Meanwhile, I am enclosing below the details of mail exchanges for your perusal. I have replaced names with designations for obvious reasons. I would be grateful if you let me know if I am following the right approach and if there is any input for me.

RE: Regarding Salary

Director

Sent: Thursday, August 08, 2013, 12:22 PM

To: Me

Cc: Human Resource

Dear __,

I am in meetings most of the day today. We can talk tomorrow about this.

Regards,
Director

-----Original Message-----

From: Me

Sent: Thursday, 08 August, 2013, 11:40 AM

To: Director

Cc: Human Resource

Subject: RE: Regarding Salary

Dear Sir,

As you know, I've only received half of my salary this month. I would like to bring to your kind attention that it is way too less for me to support my liabilities. This deduction has impacted me significantly, especially since I could not receive my salary for 50 days due to my eye operation.

I have not received my conveyance reimbursement for this month as well, and it is also pending. If I have to go into the field every day, that also requires funds. Additionally, I have a concern regarding whether the deducted portion of my salary has been put on hold, as it is my fixed salary and not variable.

Given that I need to put in more effort this time to achieve my targets and focus more on reaching them instead of diverting my mind with other issues, this deduction has greatly disturbed me. My mind is currently preoccupied with how I will meet my liabilities instead of focusing on my work.

I wanted to discuss this with you over the phone and I also sent you an SMS, but I did not receive a response from you. I am writing this in a fever of anxiety, unable to wait any longer.

You have always guided me, and I would appreciate your support in helping me through this phase.

Regards,
Me

From: HR Executive

Sent: Wednesday, August 07, 2013, 5:55 PM

To: Me

Cc: Director; Human Resource

Subject: RE: Regarding Salary

Dear __,

As per the attached email and Director's instructions, we have deducted 50% of your salary as you have not met the targets. I have written to the Director regarding your conveyance reimbursement.

Regards,
HR Executive

From: Me

Sent: Wednesday, August 07, 2013, 4:22 PM

To: Human Resource

Cc: Director

Subject: Regarding Salary

Dear HR Executive,

Please provide me with the details of my salary for this month as I am surprised by the amount credited to my account. There seems to be a mistake or calculation error as I have only received Rs. 19,194.

Also, please update me on the status of my conveyance reimbursement as it has been getting postponed week after week.

I am looking forward to hearing from you soon as this is becoming critical for me.

Regards,
Me

Did they mention how much of the salary will be deducted if you are not able to meet the target? Was the conversation on salary deduction made prior to the deduction of salary or after that? If they did so after deducting your salary, they cannot use this excuse to justify their actions. If at all, they wish to practice this, we can seek clarifications from them...

As requested earlier, kindly share details on the salary slip as well as the appointment letter regarding your salary components and deduction headings, if any. Along with this, kindly mail the email draft they sent you regarding the communication on salary deduction for not meeting targets...

Dear Ma'am, Thanks for your response. I have not received my salary slip for this month yet. Please find below the details of my salary as per my appointment letter:

- Basic: 21,000
- HRA: 14,700
- Conveyance: 4,200
- Medical Allowance: 2,100
- CTC Per Month: 42,000
- Less Professional Tax: 200
- Net Salary Per Month: Rs. 41,800

Now, after the increment, my net salary per month is Rs. 44,100. Our Director sent the following email last month. I did not respond as I am based in a different city and generally get a time slot for reviews.

RE: Meeting

Director

Sent: Friday, July 05, 2013, 7:29 PM

To: Director

Cc: Human Resource

Dear Wonderful Sales Team,

None of you, except one Sales Manager X, has shown any interest in discussing your work. You don't seem interested! Pathetic!!! No calls, no emails—nothing to discuss your work!

Well, maybe you are super confident of achieving your targets this month, which is great! For those of you (except Sales Manager X) who don't meet the minimum target this month (as indicated in the incentive plan shared), you will only get 50% of your wages this month if you fall short.

So good luck.

HR Manager, please implement this.

Regards,

Director

From: Director

Sent: Monday, 01 July, 2013, 7:43 PM

To: Director

Subject: Meeting

Dear All,

Meet me individually tomorrow to discuss the previous month and the plan for this month.

Regards,

Director

Since the latest email from your Director says he's in a meeting, we'll give some time. He said in an email today that he'll talk to you about this tomorrow. However, I am afraid all he needs is time to pass. Tomorrow is Independence Day, and many companies are having a holiday (unsure if you too have), and if you have Saturday and Sunday off, you have an extended weekend, and he won't be available to you until Monday.

The last message from the director stating he's in a meeting was at 12:22, so you can do one thing. At around 3:30, send another email to HR and CC the Director that:

"My appointment letter states my salary is ______ and I have received an increment on DATE, making my revised salary ______ w.e.f from MONTH.

The components of the salary are as mentioned below:

- Basic
- HRA
- Conveyance
- Medical Allowance

Also, note that the Conveyance Allowance has been unpaid to me since _____, which makes it difficult for me to make ends meet.

I would also like to bring to your attention that my appointment letter does not state that my salary will be linked to performance and that there would be payments depending on whether or not targets are achieved.

I do understand that the company can modify and amend rules from time to time; however, changes cannot simply be communicated via email.

If the rules are modified, I would like the Company to inform me about this. While I acknowledge that I was informed about this via email dated 5th July, for formalization, I kindly request the concerned authorities to print such clauses on the company's letterhead and have the relevant authority's signature and stamp, with the date and mentioning from when the new clause is applicable.

If, in the case, the concerned authority is unable to formalize this on the company's paper, I would request the release of my pay as due to me and as promised to me in the appointment letter and later revised as communicated through the increment letter.

Regards,

_________

And don't just email this; take a print of this and make a duplicate as well. Submit the original to HR and take acknowledgment on the duplicate for reference.

Keep updated.

This is the right answer. If it's performance-based, he can deduct. But if it's fixed, then he can't deduct.