How Can I Contest Missing Variable Pay After Resigning from My Job?

Situation Overview

I was working for an MNC in India and resigned in February. I was eligible for the variable pay (or bonus) for the period of July to December 2014 (given out every 6 months). I submitted my resignation (and communicated the notice period) on 16 January 2015. My last working day was 13 February 2015. However, when I received my final settlement, this variable component was not included. The reason provided was that I needed to be on the company's payroll at the time of payout, which apparently occurred on February 28.

Concerns About the Payout Condition

This requirement was mentioned in the offer letters, and it may come as a surprise to all employees who resigned around that time. In my opinion, the condition that an employee must be on the payroll at the time of payout is invalid, as the company could delay the payment by a month for various reasons.

Seeking Advice

I welcome any views on this matter. What would be the best approach to contest this decision?

Understanding the Variable Component of Salary

The catch with the variable component of salary is that if you leave the company before the financial year ends, you have to forgo this amount. It's important to note that an incentive bonus is not part of wages. This needs to be kept in mind.

However, you can contact higher management and request them to release the bonus, as you contributed towards achieving the company's targets and the targets set for you. Furthermore, the company may have rules specifying that the employee should be on the rolls as of a particular date to become eligible for the incentive bonus. Persuasion and tactical requests will be helpful in obtaining the bonus. Litigation may not succeed.

Since this is a US company, the financial year runs from January to December, and I was there during that period. They don't seem to have a particular date on which the employee has to be on the rolls, but they have a policy that the employee must be on the rolls at the time of payout. I find this vague because the company can decide to pay even at a later date, and the employee who is resigning has no control over it. By the way, this is part of the variable pay kept aside from the CTC and not really an incentive or bonus.

Regards,

Anyway, nothing much can be done about it. However, you can request the higher management to consider your case in the proper light in view of all these circumstances.

If the policy mentions that an employee has to be on the company's payroll, then the company is not liable to pay. However, you may approach senior management and request a discretionary payout.

You may ask why the duration is not mentioned regarding the payment of variable pay after the close of every six months. It should be clear that it shall be paid within one or two months after the close of every six months, and it can't be an indefinite duration or at the feasibility of management. However, I think you should thoroughly examine the terms and conditions of the appointment at the time of joining in the future.

Dear Nathrao, you have given your views axiomatically. Nevertheless, it remains to be seen whether these hold scrutiny against the Payment of Wages Act and the Indian Contract Act, 1872.

Though I am not a lawyer, I have read judgments on ICA, 1872. With my limited knowledge, I say that if the employers have imposed a condition that at the time of disbursement of variable pay, employees need to be on the rolls of the company; otherwise, they forego the variable pay, then the agreement is one-sided and it may not stand against ICA, 1872.

Furthermore, provisions of the Payment of Bonus Act, 1965 make it mandatory to disburse bonus to the employee, whether they are on the rolls or not. While the issue at hand is not of bonus but of variable pay, for logical purposes, PBA, 1965 can very well be used.

Fixed or variable, the simple definition of wages is "Income received for work." To make an employee work and give him only a part of wages is unlawful.

For GHedge: Has your FNF been completed? Have you received the service-cum-employment certificate? If yes, then send a letter to the MD for non-payment of the variable component of the wages by RP/AD. If MD remains inexorable to your plea, then you may approach a lawyer who handles the cases relating to ICA, 1872 and obtain his/her views.

All the best!

Dinesh Divekar

The catch with the variable component of salary is that in case you leave the company before the financial year ends, you have to forgo this amount.

Incentive bonus is not part of wages.

This needs to be kept in mind. However, you can contact higher management and request them to release the bonus as you had contributed towards achieving the company's targets and targets set for you. Furthermore, the company may have rules which specify that the employee should be on the rolls as of a particular date to become eligible for the Incentive bonus.

Persuasion and tactical requests will be of help in getting the bonus. Litigation may not succeed.

Understanding Contractual Obligations and Bonus Payments

A contract is a meeting of minds, and even if some terms are one-sided, it need not be a violation of the Indian Contract Act (ICA) 1872. The term should not be illegal, that is all. Bonus is a tool for the retention of employees. I know of many cases where employees submit their resignations only after securing the bonus in hand.

Drawing a simile between the Payment of Bonus Act (PBA) and the Payment of Wages Act may not actually work. Advice would become very complicated, and the simplest method was suggested to try and secure a bonus or variable pay. Once the matter goes into litigation, no one can be sure of the outcome.

Agree with Mr. Nathrao. Once a person resigns from the organization, the payment of any sort of incentive, including bonuses, will be at the discretion of the respective managements. Even in PSUs, productivity incentives are not paid to officers who have resigned, whereas the same is paid to superannuated employees. Litigation would only lead to a waste of money.

If it is covered in his service agreement or on his CTC, he is eligible for the same. If he had received it earlier, he can then claim it.