Is It Fair to Withhold Salary During a 3-Month Notice Period? Seeking Advice on Leave Encashment and Final Settlement

I am working in an IT organization. It is a Pvt Ltd company. Here, the notice period is 3 months. My question is, my employer is saying that during the notice period, I will not receive a salary for the entire 3 months. Is it correct?

After my completion of the notice period, they will pay me the full and final settlement 45 days later. Is it right?

Company Leave Policy

As per my company's leave policy, every month an employee is eligible for 1.5 days of leave, and at the end of the year, only 6 leaves will carry forward; the remaining will be encashed. I have 17 days of leave before my resignation.

During the notice period, am I eligible for 1.5 days of leave (for accountable purposes)? If yes, then my total leave comes to around 20 days. My last working day is in the first week of December. Will I be eligible for 20 days encashed or just 6 days?

Kindly help me.

Regards,
Karthik

There are many organizations that do not pay their employees during the notice period. However, it depends on each company.

Relieving Period and Final Settlement

The relieving period in your company might be 45 days, which is normal. All the necessary letters and final settlements will be completed after that. Also, PF forms will be provided to you during the final settlement.

Leave Entitlement During Notice Period

During your notice period, you are entitled to leave days as per the rules.

Since the leave encashment policy states "at the end of the year," you may not be eligible for that since your last working day is in the first week of December.

Regards

Payment of Full and Final Settlement

Paying the full and final settlement after 45 days is illegal. It must be paid within 30 days. Additionally, there is a rule that wages or salary need to be paid within 2 days from the last working day. (Check the state rules)

Payment of Wages Act

Under the Payment of Wages Act, your salary for three months cannot be withheld. It needs to be paid every month. The penalty for not doing so is ₹7500 per incident (but the money goes to the labor department, not you).

1. If your salary is more than ₹18,000 per month, then you are not covered by the Payment of Wages Act.
2. Companies often delay payments to ensure proper handover. Do you want to create a problem for yourself at this stage? If you can't live without the salary for four months, then perhaps you need to take it up. Otherwise, just complete your notice and leave with a good record.

After serving the notice, an employee shall be entitled to a full and final settlement of all their dues, including the last drawn salary.

Payment of Wages Act: Salary During Notice Period

Under the Payment of Wages Act, it is illegal to hold back salary for an employee. They need to be paid on the due date along with others (wage period cannot exceed 1 month and must be paid by the 7th/10th of the following month). Therefore, stating that the salary will be given for the entire notice period after completing the notice period is illegal under the act.

Furthermore, the act is clear that salary/wages must be cleared within 2 days. Other dues can be paid within 30 days.

Salary and Final Settlement During Notice Period

I am not aware of what the rulebook says on this subject, but many companies and organizations resort to the practice of holding the salary during the notice period. Full and final settlement is normally done within 30 days upon submission of no dues/handing over formalities.

Regards, Pon

Section 5: Wage Payment Schedule

All wages are to be paid by the 7th or 10th of the next month.

Section 4: Wage Period Limitation

The wage period cannot exceed one month.

Section 5(2): Payment Upon Termination

Where the employment of any person is terminated, the wages shall be paid on the expiry of the second working day. The exact wording is "terminated by the employer," but I think the same rule applies if you resign. Hope that helps. I know many companies do this, but it's not allowed under the law. One rider - the Payment of Wages Act applies up to a salary of Rs. 18,000.