Is It Legal to Withhold Salary for 3 Months During Notice Period? How Do Employees Cope?

Salary Withholding During Notice Period

The salary of an employee is withheld, and the company says all salary dues will be settled during F&FS. This is acceptable for a 1-month notice period. If the notice period is for 3 months and the salary is withheld, how can an employee survive without pay? Is it legal to hold the salary for 3 months? In this case, can an employee refuse to serve a 3-month notice period?

I think it's completely legal, and I will defer to other members of this forum to provide better insights on this. As a practice, it is completely deplorable, though, and I'll urge an open contributory thread from most other members on how to structure an exit clause for employees.

No, this is not legally tenable.

Payment of Wages Act Requirements

The Payment of Wages Act specifies that the payment of salary or wages must be for a wage period. The wage period cannot exceed a month. Furthermore, wages for the wage period should be paid by the 7th of the next month (10th for large units with more than 1000 workmen). Therefore, holding wages beyond the month is illegal.

Disbursement of Remaining Wages

Additionally, wages for the remaining period must be disbursed within 2 days from the last working day, and the remaining payment must be made within 1 month from the last working day.

Exceptions for Higher Wages

Where the wages are above ₹18,000, the employee is not covered under the Payment of Wages Act, and the above rules do not apply as such. However, in general, this rule applies on grounds of equity. In case of a complaint, the courts could very well impose such a rule as valid.

Legal Framework for Payday and Wage Payment

The payday is mentioned in the appointment letter, standing orders, and the (name of the state) Shops and Commercial Establishments Act.

There are various forms and registers that an employer has to maintain and submit regarding the payment of wages under enactments applicable to the establishment, such as the (name of the state) Shops and Commercial Establishments rules. This documentation can prove the default of the company.

Steps to Address Wage Payment Issues

You can approach the Inspector appointed under the (name of the state) Shops and Commercial Establishments Act, the office of the Labor Commissioner, Employees' or Trade Unions, Grievance Redressal Committee, or Works Committee.

Submit a written representation addressed to the Head-HR, appointing authority, or MD, and let them reply with their response.