Legal Dilemma: Can We Issue Appointment Letters on Stamp Paper to Protect Against Marketing Staff Issues?

We are a manufacturing company and have faced many problems with marketing personnel. They often leave the job without clearing their dues from the market. Therefore, to take legal action, management wants to issue an appointment letter on stamp paper. Kindly guide me.

Dear Luxture,

It's a childish notion. Your appointment letter on company letterhead is as valid a document as a stamp paper. Instead of looking at legal options to handle such cases, in my opinion, you should review your recruiting practices to ensure good hires. Additionally, make a provision for a notice period so that whoever is leaving the organization can transfer his/her responsibilities, making the exit process smoother.

Regards

Thank you for the kind response. We do have a notice period provision, but still, employees are leaving in the market. We also have a handing-over process in place. My question pertains to situations where, even after following all HR practices diligently, we still encounter such problems.

Usually, as a standard practice, an Appointment Letter is prepared on the company's letterhead with all the terms and conditions stated. The salary breakup and the notice period are mentioned in the appointment letter. Penalties regarding non-adherence to the notice period are also mentioned in the appointment letter.

Once an employee accepts the Appointment Letter after joining an organization, he/she accepts all the terms and conditions stated by the Company. In case the employee leaves the Company and does not adhere to the clauses of the notice period or final settlement as mentioned in the Appointment Letter, then the Company has the right to take legal action against that employee.

Since the Appointment Letter is signed by the authorized signatory appointed by the Company, it can be made on the Company's letterhead. The preparation of the appointment letter on stamp paper is not necessary.

Use of Stamp Paper for Appointment Letters

No need for stamp paper. A letterhead would suffice. Things could get complicated as candidates might hesitate to accept a stamp paper, and the move could backfire.

Addressing Sales Process Issues in HR Management

The problem may not be in your HR process and systems. Problems may be in the sales process. Ask your management to examine the sales process, which includes collection and accounting. This step in the sales process is very critical, and unless your management addresses this issue, the law cannot help you. Many organizations have addressed this issue with the latest technology and improved on collection and accounting.

Regards

Validity of Stamp Paper for Appointment Letters

Stamp paper is not a valid document unless it is registered. I have never heard of an appointment letter being on stamp paper.

Regards

Dear Luxture,

Greetings! You may be following HR practices, but are you following the right practices in the right way? Some members have rightly pointed out the drawbacks of having an appointment letter on stamp papers. You need to understand that even if you want to take some legal action, a company letterhead is as valid a document as stamp paper.

In addition to this, you should also agree with the fact that a person may not be able to recover/collect all dues in the notice period unless and until your notice period is as long as three months or so, and in this period, you do not tell your employee to initiate new sales and be focused only on collection.

Innovative Salary Methods for Retention

One way to curb this menace at your organization is to have innovative salary methods directed at retention. One way that comes to my mind is:

• Hire candidates at 10-15% higher than the average market salary. You will get quality candidates who are serious about their job, and it will be difficult for them to find jobs in companies from the same industry because their package will be higher than average.

• Retain the extra 10-15% in fixed deposits of the bank. Give your employee normal bank interest on this amount.

• Have a time period, let us say one year, before you make this payout. This will stop employees from going away before completing this period.

• If they still leave, the money shall be left with you.

Regards.

Your letterhead is sufficient. If you have any doubts regarding the employee, you can request a separate written document from that individual. There is no requirement for a stamp paper; a document on white paper is adequate. This document holds legal validity, and if possible, it is advisable to have two witnesses present as well.

Thanks & Regards,

J. Srinivas M.S.C., LLM
Advocate

The moment a candidate accepts the terms and conditions of appointment, issued on your company's letterhead, by signing and returning the duplicate copy, it becomes legally binding on both parties. As my esteemed colleagues have mentioned, you must introspect to revise policies related to recruitment and employment. There is an old saying: "When you pay peanuts, you get only monkeys." Therefore, investigate why your employees are leaving abruptly, assess your compensation structure in comparison to your competitors, track where your employees are going, and consider improving working conditions. It's important to note that in any organization, employees do not necessarily stay until retirement; in today's dynamic landscape, people often move between companies, cities, and even countries. While no one is irreplaceable, an annual employee turnover exceeding 15 to 20% may indicate underlying organizational issues.

So, start with introspection.

Best wishes

Rather than having the offer letter on stamp paper, you can introduce a bond during the joining process. The terms of the bond should be clearly mentioned in the offer letter. The bond will be a legal document, and if anyone breaches it, they shall face action (except in some cases such as medical reasons, etc).

Regards

The company letterhead is enough for the offer, and you may have a look at the suggestions below:

1. Making a bond (1-2 years) with employees at the time of joining.
2. Keeping some caution money in the monthly salary on your side, and employees should be aware of that. It can be provided at the time of final settlement if he/she exits cleanly. If you are giving a travel allowance, provide the allowance for the last month along with the current salary and current allowance in the next salary.
3. Please look into the employees' problems or the reasons for leaving the company without clearance.
4. Try to resolve the employees' problems in the market and the relationship between the manager and employee.

Thanks and Regards,

Praveen Devadiga
Asst. Manager - HR

The issues are not clear in your question. Under what circumstances are the marketing people supposed to clear their dues? Why is legal action to be initiated against employees who have either resigned or vanished? Could you please enlighten me on this matter?

Regards,
SPKR
18.9.13

As others have said, a letter with your terms and conditions duly signed by the authorized signatory and accepted by endorsing there should suffice. However, if you choose, it should be on a stamp paper; it doesn't necessarily invalidate the contract between you and the candidate. What is more important is your offer, unambiguous, specifying the terms and conditions which are legally valid, and the acceptance of the same by the candidate.

Regards

Hi, Luxture! As pointed out by others, your question is not clear enough. What I understand is that the salespeople leave while the accounts they are handling still owe the company some money, and you want the salespeople to leave only after they have collected such monies.

Review Your Credit Terms

If so, rather than focusing on the salespeople, you need to look more closely at your credit terms. If all the salespeople are doing is following those, then how can you hold them responsible for a management policy?

Impact of Using Stamp Paper

Also, as mentioned by others, using stamp paper will only make good people shy away.

Regards,

You can draft a confidentiality and agreement letter and add the clause regarding the matter of concern as you mentioned above.

Regards,
Abhinav Tripathi

Appointment letter on stamp paper is not going to solve your problem. One effective, but not very professional, option will be to ask the employee to sign a bond and deposit a refundable surety amount with the company. To some extent, this will make the person follow the system when he wants to leave the company.

Thank you so much for the great response. Indeed, I received the directions and extracted the middle-level conclusion of a win-win situation. We have issued the appointment letter on the company letterhead, and the important conditions for us have been documented on stamp paper.

Regards,

Hi, I just need clarification on the same. What if employees leave without serving the notice period, even though we have a provision for it? What should be done with those individuals who have gone absconding?

Luxture

"We have issued an appointment letter on the company letterhead, and the conditions that were important to us were acknowledged on stamp paper."

Sorry, but you have missed the whole point completely. A company letterhead duly stamped and signed by the authorized signatory is and will always be considered a valid legal document in any court of law and tribunals. So, if you have done what you said you have done, then believe me, it hasn't changed the status quo except for the fact that now you feel mentally reassured. A sense of false security has been created. That's all.

But the issue still remains. Why is it happening? And happening so frequently that you are pressurized to look at ways to ensure they can be forcefully stopped. Why? Why not just look at the root cause and remove the cause to have a happier organization?

Are you or the management even aware of the implications of taking legal action against an employee for this purpose? Very soon, the news will spread, and you will stop getting good or even average candidates to join you. The only people who will join you would be misfits who are either desperate or lack the skills to be employed elsewhere. Yes, this problem will stop, but so will organizational growth.

Every sale has three components: price, delivery, and payment terms. If money is stuck in the market, then you definitely need to look at your order acceptance process. I can understand one or maybe two people leaving you like this, but from the way you have reported this issue, I presume that the number is quite large, and hence high receivables are being reported. However, that's a sales process issue, not a terms and conditions issue.

But to each, his own... Cheers!

As mentioned by me and several others, this seems to be an issue of credit terms or sales processes that are put in place by management with little—if any—control by the salesperson. I am curious to hear from the questioner if this is indeed the case. If so, and they are still getting "employees" to accept their terms on stamp paper, then those "employees" must be either desperate or foolish. Both scenarios are not positive signs...

Just my thoughts...

Appointment Letters and Legal Action for Vanishing Employees

Appointment letters with all the conditions of appointment, along with an enclosure of acceptance format, are usually designed and issued on the company's letterhead, duly signed by the concerned appointing authority of the company.

The issue concerns action regarding "The vanishing employees who are supposed to collect the market dues and how to make them responsible or initiate legal action against them."

This situation arises when sales or marketing employees are entrusted with cash collection of sales proceeds. When sales or marketing personnel are entrusted with cash collection, the usual practice is to obtain an undertaking of acceptance to deposit adequate security or caution deposit before reporting for duty. In some cases, an undertaking on non-judicial stamp paper, along with two sureties and two witnesses, is required before accepting their duty report. When an undertaking is obtained on the company's letter, along with two witnesses, it is considered sufficient. However, some companies that are overly cautious tend to collect such an undertaking on non-judicial stamp paper.

I recommend consulting with soft drink/packed food/commercial gas distributors to understand the appropriate methods they follow, as the practice of cash collection at the time of delivery is common.

I believe your concerns have been addressed.

Regards,
SPKR