Is It Legal for a Company to Hire an Experienced Manager on a Stipend with No Leave? Seeking Guidance

Dear Seniors, Recently, I have come across a case in which the company has hired a person with 8 years of experience on a stipend, giving him a salary of 3 lacs per annum, and placed him in the grading system of the company as Grade 4 (as mentioned in the appointment letter). He has also received an appointment letter with a probation period of 12 months, which he only received after joining. However, he is not allowed to avail any leave since he is on a stipend and is treated as a trainee. The person seeks our help. Kindly enlighten me. Is it legal? On what basis can he speak to his company? Looking for your contribution and guidance. Regards, ATM HR Professional

You have not provided essential details regarding the nature of his job, i.e., whether he is independent or receiving training under someone else, the duration of his training, whether the training is a precursor to the job or a requirement for the position he was hired for, and whether the stipend set for the training will continue as is or be converted, at least nominally, to a salary during the entire probationary period.

Nowadays, in the guise of flexible employment, certain modern employers resort to instant hiring and unceremonious firing to bypass established ethical standards and necessary legal obligations. This trend is particularly prevalent for employees who do not have the protection of labor laws. Hence, prospective employees must be cautious of enticing yet dubious employment offers. Despite having eight years of experience, he willingly accepted the trainee position, indicating he is well-versed in the pros and cons of such employment. Therefore, no one can assist him at this point.

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Thank you for the details. There is no training period clause in the appointment letter, only a probation period of 6 months. As an HR professional, I seek your help to understand whether we can use the word "stipend" for the salary given to a "manager"?

Regards,
ATM

Dear Ankita,

Literally, the word "STIPEND" means a fixed periodical payment for the services rendered or to defray expenses relating to the services rendered. When one is appointed as a manager and placed on probation just to enable the employer to ascertain his suitability both for the job of manager and the organization, the entire workload of a regular employee is extracted from him while assessment is simultaneously made on his performance and professional conduct befitting the cadre in which he is appointed as a probationer.

Then, how can we equate the remuneration paid to him for a manager's job to that of "stipend" normally paid to a learner or apprentice being trained in a particular trade or a priest performing certain rites and rituals, the knowledge of which is possessed by him only? So far, I have not come across any service rule distinctly distinguishing the remuneration paid to a probationer from the salary payable to a confirmed incumbent on the same post. To me, therefore, stipend is a misnomer for the salary paid to a probationer and will certainly lead to certain complications such as contribution to PF, etc.

Hiring and Employee Adjustment Period

The company is hiring an employee to meet their requirements based on the suitability of the individual. If the company believes that the employee needs some time to adjust to their work environment in accordance with company policy, they may consider that individual as a learner for a certain period, even if the person has experience from previous companies.

In this scenario, the company may provide a stipend during this period while appointing the individual to any position within the company. The manager is one such position within the company, so there is nothing wrong with appointing the individual to this role.

There is a notion that the so-called 'Co policy' will overrule laws and ethics. The above appointment is to circumvent the laws to show that he is not employed for 'salary' but for a stipend.

Regards,
Varghese Mathew

I fully agree with Mr. Umakanthan, and hats off to him for his explicit explanation. I only wonder why the manager accepted such a role with a stipend despite having 8 years of experience. Having accepted it, and perhaps joined as well, he cannot make inquiries now. This is something he should have done before accepting the job!