Seeking Advice: How to Handle Unfair Settlement Payment and Exchange Rate Issues?

Seeking Advice on Settlement Payment Issues

My son is a senior software professional, and last year he was selected by a Bangalore-based software company to work for them in Belgium. As per Belgian policy, all benefits were payable to such employees in Belgium.

After working for a couple of months, he resigned from the job and joined a company in Gurgaon from May of this year. He gave the stipulated period of notice for resignation, but well before the expiry of the notice period, it was accepted. The subsequent sudden winding up resulted in incurring extra costs for him. After a long delay, his employer released his full and final settlement amount. During phone conversations, my son orally consented to receiving the money in India since the settlement payment was already significantly delayed. Now, in mid-August of this year, the employer unilaterally remitted the settlement amount to his account without his prior knowledge or consent, making undue deductions. The most frustrating part is that while making the payment for the settlement, the exchange rate applied dates back to April 2013, the period he worked with them, rather than the date on which the due amount was transferred to him, resulting in a loss of around 20-25 thousand rupees.

As a professional, he cannot afford to spend time pursuing the matter legally, as it may not be cost-effective or commensurate with the efforts involved. On the surface, it is evident that an injustice has been done to him, but the management has outright denied making up for the loss or transferring the amount to him in Euros in Belgium, citing that the settlement, once done, cannot be reversed.

I seek valued opinions on how to proceed in this matter to achieve results, whether at the bureaucratic level or through some other means to get the desired outcome. Are there any judgments or rules regarding the applicability of the exchange rate as of the date of actual payment, despite the apparent plea?

Regards,
Bhatia.

On the face of the case, the information shared is not enough to give you guidance. One of the few important factors is the Type of Contract Employment. Everything will depend on this. Only after someone studies this contract can one advise you properly. I suggest consulting the same with a CA (International Tax Expert) or a Solicitor (NRI Expert) to get their advice.

I feel that the loss due to the forex exchange rate argument will not benefit you, as it has failed on various grounds to yield the benefit and is usually termed as "gambling." You gain if it goes up and lose if it goes down. So, rather than fighting on the forex rate, ask for your son's legitimate full and final settlement as per company policies and the appropriate Labor act, whichever is applicable.

Regards,
Ukmitra

I must say that I am rather surprised at the outcome as you have described it. On the whole, Euro companies are quite quick and accurate in processing full and final settlement of salary or wages because of the Euro employment laws.

Having said that, as Ukmitra has written, it all depends on the type of employment contract.

Furthermore, as Ukmitra has written again, forex losses and gains are not "protected" at a particular rate.

If there is a dispute, as in your case, when the dispute is settled, any amount owing is calculated in Euros at the time of resolution; the rate cannot be "backdated."

You are right that pursuing the matter may not be economically viable through legal channels.

However, you are legally entitled to ask for interest to be paid where an undue delay has occurred, as long as the delay was on the part of the employer and not your son. Also, you need to ask for clarification of the "undue deductions," but bear in mind that this may be due to the contract clauses.

The employer is not obliged to get your permission to remit monies into your account or even inform you.

You may, if you wish, send me a scanned copy of the contract, and I may be able to help you further.

In any case, I hope the above helps.

Regards,
Harsh

I am not sure, but hopefully, the company must have followed the terms as per the contract or agreement. Please have a careful read of the contract, and if there is any doubt regarding the Full and Final Settlement (FNF), then consult with a Chartered Accountant (CA).

Also, regarding the exchange rate applied by the company for the payment, I would say that it's always uncertain. The company chooses to pay according to the exchange rate that was at the time of resigning, not the current rate. I think you cannot complain about this matter as it's like a gamble, and after seeing the scenario, the company decided to pay as per their choice.

Exchange Rate Concerns in Settlement Payments

Learned professionals, please allow me to express my gratitude for having spared time to consider my problem.

I am not a person with a legal background, but in my humble view and as per general prudence, the company's liability for the determined amount, if it is to be paid in equivalent Indian rupees, should be worked out based on the prevailing exchange rate as of the date of the actual payment of the assessed amount. The same obviously holds good for international trade as well. For example, when an exporter receives payment of export bills in India, they receive credits into the account at the prevailing rate of exchange as of the date of payment and not on the date on which exports were made. How can the rate prevailing two months prior to the date of payment of the amount be applied to the detriment of the interests of my son? Assuming that there was a downward revision of exchange rates, i.e., the other way round, the company would have still paid my son at higher rates, meaning the rates prevailing during the period when he was working with them.

Additionally, there was a promise from the Finance Department to my son, saying that they would do what is in his best interests and a promise to send him the settlement details. Nobody advised him that the choice of receiving money in Indian currency would adversely affect him. Perhaps if the promised details had been sent, he would have accepted the money in Euros only as per the company's policy. My son never gave his written consent to receiving payment in Indian rupees. The oral approval was, in a way, conditional.

I shall be obliged for a reconsidered view in light of the above submissions.

Thanks and with regards,
Regards
I M Bhatia.

I read with interest your view. However, it comes down to the contract where exports are concerned; the amount to be paid for the goods is predetermined by way of a pro forma invoice. The price to be paid is as per the pro forma invoice no matter when the goods are dispatched.

Mechanisms for Payment Timing

Mechanisms do exist where the payment of the goods occurs when they:

1. Leave the factory gates
2. Are delivered to the docks
3. When they are on board the ship
4. When they arrive at the importing country's docks
5. When they arrive at the importing company's warehouse.

Each one of the above will attract a different price according to the contract, which in turn will determine the pro forma invoice.

Both the buyer and seller take a "gamble" on the exchange rate movement. Similarly, the Euro company will have agreed to a settlement according to the contract agreement, even if the agreement was verbal, as in your son's case.

Allow me to ask, if the currency movement was the other way around, would your son have returned the "excess"?

Furthermore, see it from the Euro company's view. They have paid (in their opinion) the correct amount in their currency; therefore, they cannot be held responsible for forex movements, particularly as they have no control over it.

Now if they had made an adjustment and paid in Indian Rupees, the amount that you wish, then the amount in Euro would be incorrect, leading them into trouble with the authorities. I am sure you can understand.

I know this is perhaps not what you want to hear. I can now only refer you to my earlier comments.

Regards,
Harsh

This is in addition to what other senior members have said. You could have provided the post with exact dates, which would have brought clarity. In your post, I find the following statement to be the most important:

"On the face of it, patently injustice has been done to him, but the management has flatly denied to make good for the loss or transfer the amount to him in Euros in Belgium as per Belgium policy on the plea that the settlement once done cannot be reversed."

Try to find out whether your son can sue his ex-company on the above grounds. Since the payments were delayed, he had to accept the full and final settlement in India to avoid the monetary loss caused by the delayed payment.

Important Points to Consider:

a) What amount would your son have received if he had received the full and final settlement immediately in Belgium?

b) What amount did he receive, and what is the exact difference? Was the amount paid with interest?

Your son can sue his ex-company on the above grounds. Otherwise, I do not find much merit in pursuing the case.

Thanks,

Dinesh V Divekar