Is It Fair for Companies to Deduct Pay When They Relieve Employees Early? Seeking Advice on Notice Period Policies

Could someone please help clarify this issue? In my last organization, they had a 90-day notice period for separation from the company. They relieved me 11 days (7 working days) before the actual last working date, even though I hadn't requested early relieving. During the final settlement, they deducted 7 working days from my earned leave outstanding balance, resulting in a loss of pay for 18 days (11 days early relieving + 7 days from EL).

If employees want to leave before the actual last working day, the company asks them to pay the salary for the days they leave early. Is the same applicable to companies if they want to relieve employees before the actual last date of service? Is the policy applicable to both employee and employer? Please advise on how to proceed with this.

Thanks, all. Have a good day. 

At the time of separation, you should have raised this point and made it clear to your employer that you were not intending to be relieved before the due date as per the Appointment Letter. Now, very little can be done...!!!

Basically, the employer needs time to find a replacement and ensure a smooth handover for the work to function seamlessly. However, since the employee has already resigned and does not need to hand over anything, if the employer releases the employee before the notice period expires, no action can be taken against them.

Thank you for your valuable time and reply. I just wanted to add one more point. During my exit interview formalities, I asked HR the same question, and he said that I would receive the salary for the actual day of separation, and there would be no deduction of earned leave balances as well. However, this was conveyed orally and not in writing. Now, they have deducted my EL. Can you please advise me if I can take any legal action on this?

Thanks again.

Thank you for your valuable time and reply. If so, there will always be benefits for employers, but what about employees? If a company wishes, they can relieve employees early, but if employees wish to leave early, they have to pay out of pocket? Is this good for a healthy relationship between employer and employee? Is there no one to help or support employees?  Sorry if I said anything wrong...

Have you signed any Full & Final Settlement papers? If the payment was done through a cheque, have you withdrawn any amount from the account? If yes, then nothing can be done. If no, then something can be done. What was your designation, compensation, roles, and responsibilities in your organization?

No, I haven’t signed any settlement papers, and it’s direct credit through the bank, not a cheque mode. Also, I haven’t received that amount either. My role is as a Team Lead, and the organization is one of the top captive back offices in Chennai.

I think you can resort to the Civil Court for dishonoring the Appointment Letter clause.

Thank you for your valuable time and reply. If so, there will always be benefits for employers, but what about employees? If the company wishes, they can relieve employees early, but if employees wish to leave early, they have to pay out of pocket? Is this good for a healthy relationship between employer and employee? Is there no one to help or support employees?  Sorry if I said anything wrong…

This is a hard fact, and one has to accept it, regardless of the relationship between employee and employer. After resignation, an employee typically shows less interest in their work, and the loyalty factor diminishes, hence it cannot be fought for.

With regards to your earned leave, you can claim it. Send them a letter requesting the release of the leave amount, and in case you do not receive the payment after three gentle reminders, you can take appropriate action if desired.

Dear Mr. Prashant, let's be practical. If the earned leave of 7 days is a good amount to fight for, or if we end up paying more for a meager amount.

Thank you, Dear Prashant and Saji, I will contact HR regarding this matter. If there is no progress or if there is a negative impact, I will consider taking legal action. In the case of legal action, whom should I contact?

Before stating anything or giving any kind of suggestion, it will be better to go through the terms and conditions of your Appointment Letter/Service Agreement (if any). First, see whether there is any condition permitting the employer to do so. If not, you can bring the matter to the knowledge of the management. It is always better to handle such issues with written correspondence in a professional manner.

Just like the issue of an offer letter before appointment, management shall issue a letter to the resigned employee as an acceptance of resignation letter before relieving, mentioning the date of resignation of the employee and the date on which the management is going to relieve the employee under which conditions with acknowledgment. The copy of the same, along with a no dues template, shall be forwarded to other related departments too. This process gives a clear picture to the resigned employee, management, HODs, and other related departments regarding the matter, which is helpful for both the employer and employee to settle the account of the resigned employee perfectly.

Understanding Leave and Settlement Policies

If you have earned leaves left and you did not opt for encashing them, you can be treated as on leave for the last seven days, and for that, the company needs to pay you.

In case there is no full and final settlement signed by either party, the case is still open, and you can write to them. You might have had some dispute or differences of opinion with someone at the helm of affairs who may be holding all this. On the contrary, you might have some penalties pending for your actions during your tenure, etc. You need to write to the right person, such as the head of HR or CEO. These individuals are thoroughly professional.

Separation and Settlement Processes

Separation and settlement are legal and transparent activities everywhere, and both parties can question and get clarifications. Sometimes we need to see through the situations...

Employer's Responsibility in Early Relieving

It is not fair for the employer to relieve the employee early arbitrarily and deduct the Earned Leave (EL) salary for that. They are right if the employee is relieved early upon his request. However, as there is no provision in Indian labor laws on relieving/final settlement, no legal remedy is available for a person.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons].

Earned Leave or Privilege Leave Policy

Earned Leave or Privilege Leave will be 1 day for every completed day of service. (This may slightly vary from organization to organization). So, unless there is a service, no leave will be credited.

Notice Period and Voluntary Retirement Scheme (VRS)

The next question is the 90 days' notice period. It is the prerogative of the management to decide when to accept the VRS application of an employee. It is very clear that, although an employee can apply for VRS, it is up to the management to decide whether to accept it and, if accepted, when to accept. This decision can be made on the same day, the very next day, or within 90 days.

If the management has sufficient reasons to believe that an employee's conduct while in service has caused damage to the organization and requires a charge sheet, it can be issued within the notice period, leading to the rejection of the VRS. Therefore, in the given case, if the employee has not worked for 7 days, no Earned Leave or Privilege Leave will be counted for that period.

Hi, Legally, the employee-employer relationship does not end until the relieving date after resignation. Secondly, ELs are your lawfully earned leaves, so every employee is entitled to get paid for the ELs up to a limit.

Understanding Early Relieving and Earned Leave Deductions

If I have understood this properly, the company has relieved you earlier than the contractual notice period. This is perfectly legal and valid; in fact, it is standard practice. However, deducting these early relieving days, 7 in this case, from the employee's earned leave is wrong, erroneous, and bad in law irrespective of whether the employee has signed exit papers and received settlement dues.

A gentle letter drawing attention to this fact should be written to the company. Failing which, you should proceed legally since the case is totally in the employee's favor, and the employer cannot escape paying earned leave for wrongful deduction. I hope the employee has not submitted, at any time after resigning, in writing or orally about the inability to work for the entire notice period of 90 days, and it is solely the employer's decision to relieve the employee early.

You have the legal remedy, but instead of going the legal route, I would suggest issuing a letter to your employer politely, in simple language. Describe the facts and suggestions mentioned herein by learned members.

Legal Notice Period Clarification

First of all, it is clarified that a legally enforced notice period of more than 1 month is not enforceable. If you refer to the provisions of any State S&E Act and IESO (Central or State), you will find that an employee or employer, as the case may be, cannot terminate employment without giving one month's notice. I have not seen a 3-month notice period in any provision of labor law legislations, except in the ID Act, and that too in the case of retrenchment.

Furthermore, any agreement of whatever nature, if against the law, is void ab initio. So, if your appointment letter prescribes a 3-month notice before termination of the employment agreement by either party, it is against the statute legally. In practice, most companies do provide a three-month notice period.

Early Relieving and Salary Adjustment

Even if we accept that it is an agreement between the employee and employer and binding on both equally (without delving into legality), then you have not requested early relieving, but they relieved you 7 days early of their own accord. So, you can ask them to pay 7 days' salary.

I would also like to point out here that earned leaves are not adjustable against the notice period or for short days in the notice period as per the law (as mentioned in almost all states' S&E Acts).

Regards