What Happens to Your Final Pay If You're Fired for Absence Without Notice?

Dear All,

If a company terminates an employee due to absence without prior notice, what is the procedure for the full and final settlement of this employee? Will the company provide basic pay as per the notice period mentioned in the appointment letter? Is the company obligated to complete the full and final settlement? What components of salary are included in the F & F?

Please provide information according to labor laws.

Thanks & Regards,
Shiklha

Full and final settlement is to be done when there is a termination of service of an employee. Subject to the terms of employment in the appointment letter, the employer has to pay full wages or gross salary equivalent to the notice period, which the employee would have drawn had they been in service.

Regards,
B. Saikumar
HR & IR Advisor

No labor Act defines notice pay. They define only wages, and each Act defines wages in a different way, keeping in view the objectives of the Act concerned. Thus, the definition of basic wages under the P.F. Act is different from that under the ESI Act. Therefore, you need to rely on an Act that deals with the rights and obligations of an employee in general. The Payment of Wages Act is one such Act. If the employee in question is covered by the Payment of Wages Act (if his salary is Rs 18,000/- or below), then he can file an application before the authority under the P.W. Act for the recovery of wages.

Definition of Wages Under the Payment of Wages Act

The question then arises, what constitutes wages under the said Act. Section 2(vi) defines wages as including all remuneration by way of salary, allowances, or otherwise payable for the work done by an employee and includes, among others, any sum which, by reason of the termination of employment of the person employed, is payable under any law, contract, or instrument, etc. In the instant case, the notice pay payable by the employer is the sum payable under the contract and hence forms part of the wages defined above.

Please go through the provisions of the Payment of Wages Act before making a decision and convince yourself first. What the seniors provide here shall not be construed as some legal opinion to be acted upon but only as a reference, guidance, or direction to the member posting a query towards finding an answer to his query/problem.

Regards,
B. Saikumar
In-House HR & IR Advisor

I believe the questioner is inquiring about the full and final settlement of dues, if any, to an employee upon their termination for disciplinary reasons, specifically unauthorized absence.

True, Mr. Umakanthan. But the member did not say that the termination was brought about by way of disciplinary action. The post conveys the impression that the employee stopped coming to the office/work, which compelled the employer to terminate his services in the manner of termination simpliciter. That's why the querying member sought to know what components of salary are to be taken into consideration for paying him notice pay. Since the termination was already brought about by the employer, it is futile to suggest that the employer shall initiate disciplinary action now.

Regards,
B. Saikumar
In-House HR & IR Advisor

Your answer regarding the termination as a discharge simpliciter is correct. However, since the question was framed in the simple present tense and specifically asked about the payment of notice pay on unilateral termination of the contract of employment due to unauthorized absence, I have a doubt. Is the management planning to terminate under the guise of discharge simpliciter to avoid the lengthy disciplinary process?

Mr. Umakantan, thank you for raising the issue. I reread the post, and yes, as you mentioned, the member who posted the query framed the question in the simple present tense. In that scenario, if the employee is a workman, it is open to him to question the termination on the grounds of it being punitive in the appropriate forum (conciliation and subsequently in the labor court), and it is for the employer to prove the bona fides of his action. If the employee is a non-workman, he has a civil remedy which he is unlikely to pursue as in the majority of cases. Thus, it is prudent for the employer to conduct a disciplinary process for unauthorized absence and impose an appropriate penalty. A penalty of dismissal may not be suitable in every case of unauthorized absence; therefore, your apprehensions may also be valid.

The members leave many gaps in the information, leaving it open for the responding members to fill in those gaps by stretching their knowledge and experience. In this instance, I confined myself to the limited question asked by the member regarding what components of salary/wages shall count for notice pay without entering the domain of decision-making of the employer in respect of the termination since the reply was not sought on termination. I have answered the limited question with reference to the Payment of Wages Act as the member sought to know the reply within the framework of labor laws. Is it okay? If there is another dimension to this limited query that I missed, please enlighten me for my knowledge's sake and that of the members.

Regards,
B. Saikumar
HR & IR Advisor

Your answer to that part of the question relating to notice pay in the event of full and final settlement is highly commendable as it logically connects the matter to the intricate point of the provisions of Sec. 2(vi) of the Payment of Wages Act, 1936, in addition to the terms of unilateral termination of the contract of employment by the employer. I have nothing to add other than placing my heartiest appreciation to you on record for the beautiful interpretation based on perfect cross-reference.

If any company terminates an employee on grounds of discipline (code of conduct), can we hold his full and final settlements like salary and other payments along with his relieving letter and issue a termination letter? Will there be any legal issues against this? Please advise as per labor laws.

Under the Shops and Establishments Acts, it is generally provided that an experience certificate has to be issued, whether the employee is to be dispensed with simpliciter or due to misconduct. Additionally, the full and final settlement of dues must be completed at the time of discharge. It is the duty of the inspector to ensure compliance with these regulations. Similarly, under the Payment of Wages Act, employees earning less than Rs. 18,000 can recover wages under the Act.

Termination and Full and Final Settlement Procedures

You can't terminate the service of any employee without a domestic inquiry and punishment on legal grounds. For example, when an employee commits misconduct such as disobeying superiors' suggestions, being involved in incidents, or being convicted by a court order. The first two instances require a domestic inquiry by a police officer. If possible, the police officer will file an FIR. In such cases, you can suspend the employee's service by paying them 50% of their wages for up to 6 months. After six months, the payment should be reduced to 1/3 of their full wages. In the third scenario, no inquiry is required.

Moreover, you can't withhold the full and final settlement, including salary, except for gratuity under the law. The full and final settlement should be paid within 15 days of the completion of termination from service. Failure to do so may result in the employer not being able to terminate the employee's service. If it is proven in court that the employer engaged in bad practices, the employer may be penalized by having to reinstate the employee's service with full back wages.

Hello Sir,

I am MD. Razi, a Medical Coder at Champ Info Software in Noida for the past year. I am currently under a one-sided bond for 5 months. If I choose to leave the company, I will be required to pay 5 months' worth of salary. However, if the company terminates our employment without any compensation or notice period, we would like to seek your advice on whether we can take any legal action.

Please advise.