Is Our Proposed Separation Policy Legal? Seeking Advice on Compliance and Acts

Separation Policy Proposal

Can we prepare a separation policy like this:

1. If an employee resigns before one month, no salary will be given.
2. If an employee resigns between 1-6 months, only the basic salary will be payable for the unpaid period.
3. If the company terminates or asks the employee to resign, then the company will pay only the basic salary between 1-6 months.

Is this policy legally valid? If not, which act applies?

You have asked your query from a legal point of view only. In that case, I recommend you refer to the Payment of Wages Act, 1936. I doubt whether your proposal will stand scrutiny of this act.

Management Science Perspective

I would like to go a little further and handle this case from a management science point of view. When would you like to disclose these conditions of employment to the job candidates? Once these conditions are disclosed, do you think that you will attract talented candidates? Will a job candidate who is quite confident of getting the job and who also has a high level of self-esteem join under these conditions?

The unsaid part of your post is that your organization could be facing a problem of attrition of newly joined employees. To mitigate the expenses of employee exits, you have tried pulling this rabbit out of your hat. But then, if this policy comes into effect and if some talented job candidate refuses to join, what will be the cost of lost opportunities; have you measured that?

If employees are not sticking, then your problem could be with your organization's culture or your leadership. Please fix either or both of the problems. If other companies are able to retain employees, then so should you. Study your organization's ills and take remedial measures rather than finding unconventional solutions.

Case Study: Photo Studio

My experience: I conducted training for the staff of one major photo studio. They had a similar problem. The owner went to the extent of withholding salary for the first two months. Even then, attrition did not decrease. Those who wanted to leave did so anyway, without bothering about the loss of two months' salary.

Thanks,

Dinesh V Divekar

My main concern is whether we are legally correct to pay only the basic salary to terminated employees when the company requests resignation. As per the Payment of Wages Act 1936, we should pay one month's extra salary to terminated employees. However, here we are only paying the basic salary for the days worked. Please suggest briefly.

Thanks,
Dev.

Please help confirm, can we ask the employees to repay if they refuse to serve the notice period and leave the organization within the probation period?

Thank you.

Hi Comp_HR,

If your appointment order contains the clause "either one month notice or one month gross in lieu notice," then you can instruct employees to either give the one-month notice period or provide payment in lieu of notice.