Curious About Termination Clauses: Do Companies Really Owe Extra Salary?

I am working in a staffing organization. I wanted to know something about the termination clause. I heard from one of my HR friends that if, for example, an employee is terminated by an organization, then the organization has to pay the employee an extra 2 months of salary because they terminated the employee. Is this exactly true?

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In the scenario described, it appears that there may be a misunderstanding regarding the termination clause and the associated compensation. It is essential to review the employment contract and relevant company policies to determine the actual terms and conditions surrounding employee terminations and any required compensation. It is advisable to seek clarification from the HR department or legal team to ensure accurate information is obtained.

The termination clause differs from company to company. There is no hard and fast rule that the company has to pay 2 months' salary when terminating an employee. One may refer to the 'termination of services' clause in his/her appointment letter.

Generally, most companies follow the trend of a notice period wherein after probation, an employee has to serve a notice period. For example, if an employee leaves the company, he has to provide one month's notice. If he is unable to serve the notice period, he has to pay one month's salary in lieu. Likewise, if the company terminates the services of an employee, the company pays one month's salary in lieu. Please note, this is just an example, as already stated above, it depends on the clause of the appointment letter.

Regards,
Ashutosh

I fully agree with Mr. Ashutosh. It depends on the company's policies as mentioned in the termination clause of the Appointment Letter/Employee Handbook. During my audits, I have encountered companies that do not provide any compensation upon the termination of an employee's service due to severe misconduct such as sexual harassment, consumption of alcohol on duty, theft, etc.

If termination is on account of proved misconduct, then payment in lieu of the notice period is not applicable because this termination is by way of punishment. If termination is on the expiry of the contract period, then also payment in lieu of the notice period is not applicable. If termination is during the period of probation, then it is the decision of the management, and payment in lieu of the notice period is required (if there is a company rule or specific clause in the appointment letter).

Thanks,

V K Gupta

Termination Policy: Fraud or Mistake by Employee

In cases of fraud or mistakes by the employee, it is not mandatory to pay the salary. Here, due to the staff's mistake, he/she was terminated. No company is bound to pay the compensation amount.