Is It Fair to Withhold Bonuses and Demand Full Retention Payback When Leaving Early?

Retention Payout

There is a retention letter signed off by the colleague, which states that if you leave the company before the specified period, you are liable to repay the complete amount. This amount is paid to the colleague upfront. If a colleague is under an active retention clause with a lock-in period of 18 months and resigns before completing 18 months, should the payback be the entire retention amount? Should this amount not be pro-rated according to the tenure served?

Is it lawful to recover the complete amount?

Performance Bonus

The performance bonus is included as part of the CTC, and the performance year runs from January to December, with the payout occurring in March. The company exit policy states that if you are on notice at the time of disbursement, you will not be paid.

Question: Is it legally correct to withhold the bonus of a colleague who has worked throughout the year and performed well? The justification for not paying the bonus is because the colleague is on notice; however, the colleague resigned in February. It is the company that has chosen to pay the bonus in arrears, so why should the colleague be penalized?

Can you please advise?

Attribution: [URL] #ixzz2utQn4wHp

Retention Payout is an amount paid by the employer to the employee when joining, similar to a joining bonus. It is subject to whatever terms they mutually decide on. The amount is not covered under the Payment of Wages Act or any other labor legislation. Therefore, this will be purely based on the Contract Act. Under the Contract Act, the employee agrees to some terms and accepts compensation for the same. If the employee fails to fulfill their obligations, they are required to return the compensation. Where the terms clearly state that the employee has to return the full money if they leave early, then they need to honor what they have agreed on.

An exception would be if the terms were misrepresented, not explained, or if they were signed under coercion.

Performance Bonus

The Performance Bonus is an amount paid outside the Payment of Bonus Act and therefore does not have statutory protection or norms. It depends on what is in the scheme the management has put out. (I am assuming the management has clearly laid out the scheme and circulated it or otherwise clearly informed the terms for the concerned employee).

If the terms specified that the employee will not be eligible upon resignation, then they have no option to protest against it now. They should have refused to agree when the terms were made known to them. On the other hand, if there is no scheme or terms specified at all, then it is at the discretion of the management who may or may not wish to pay it now.

While it may not be fair that the employee will not get the money since they have resigned, if those are the terms, then that is it.

Please remember that CTC is only an internal document that shows the cost to the company (or likely cost to the company) and not what the employee is getting. So the amount being in the CTC is immaterial.