Is It Legal for Employers to Delay Salaries by Changing the Attendance Cycle?

Is it Legal for Employers to Hold Employee Salaries?

I am currently associated with a small-scale IT company. We are in the process of regularizing our attendance and payroll cycle. Presently, we follow an attendance cycle from the 1st to the 30th/31st of every month, and salaries are credited on the 1st of every month.

However, our management team is considering changing the attendance cycle from the 25th to the 24th of every month. This change is proposed so that the accounts and HR departments have sufficient time to process the salary inputs, allowing salaries to still be credited on the 1st of every month.

If we implement this cycle into our payroll system from next month onwards, then 6/7 days of salary for every existing employee will be held by the company. This amount can only be cleared during the employee's full and final settlement.

Please let me know how legal this act would be, as the company will hold the employee's salary for those days on which they have actually worked.

It is a good idea by the management to change the attendance cycle from the purview of administration. However, just because of the technical change in the payroll system, the employees should not suffer. Work out a one-time modification in the system (under some miscellaneous head) and pay the entire salary for the first time. This should be possible with some technical assistance. If in case this is not possible, give away the 6 days' salary by way of cheque. It is not advisable to wait until the full and final settlement.

Regards,
Sree

Hi Roshni, There are many companies that process the technical aspects on a 25-24 cycle. What you can do is, when you implement this cycle for the first time, process for the 1st to the 24th of the month and pay accordingly for those 24 days. Then, you can start the 25-24 cycle, which will work smoothly. This way, you are holding the salary until the Full and Final (F&F) settlement. Neither are you violating the law, which states that payment has to be made monthly at the maximum, so you don't exceed your 30-day period. And your technical glitch is also taken care of. All the best, hope it helps.

Thanks, Sree. I have discussed this idea with my management team, but it seems they are not willing to opt for it. I am not very sure about their exact thought process behind this, but what I could sense is they want to hold the money from employees' salary. They have made up their mind and don’t want to get convinced. Is there any compliance available under any law that may not allow the employer to do this?

Regards, Roshni

Implementation of 25-24 Payroll Cycle

Hi Ankita, thanks for your input. For the initial implementation, we will be following the 1st to 24th cycle, but the salary will be credited on the 1st of the next month. This means employees' six working days will remain unpaid, and this amount will be on hold until we clear the full and final settlement. This is where I am facing a challenge. 

Regards,
Roshni

Thanks for your inputs. For the first-time implementation, we will be following the 1st to 24th cycle, but the salary will be credited on the 1st of the next month only, though employees' 6 working days will remain unpaid. This amount will remain on hold until we clear the full and final settlement. This is where I am stuck up :-|.

Clarification on Salary Hold

How come the employee's 6 working days' salary will be held up until the full and final settlement? In the first month, you are paying for the 1st to the 24th, and in the second month, you are paying from the 25th of the first month to the 24th of the second month, and so on. If the employee leaves in between, the difference in working days from the last salary paid month until the last working day has to be calculated. It seems that there is some confusion built up in your mind.

This is not as difficult as you guys are thinking. If the cut-off date for salary processing is the 25th to the 24th of every month, then the balance days can be shown as supposed days, assuming that all employees will be present for the next 6 days. If not, then in the next salary cycle, you will either mark their leave as "CL, SL, or PL" or show it as leave without pay and deduct accordingly. (However, every employee should be aware that the salary cycle is from the 25th to the 24th of every month to avoid any confusion.) In case an employee leaves during that period, you can recover that amount in the F&F process.

Thanks,

Mahendra