Is Our Company Obligated to Pay a Notice Period Salary After Immediate Resignation?

Dear All seniors, I am working as an HR in an IT Company. Recently, one of our employees resigned on 29th May. The employee was at a junior level, so there was no need to take a backup or hand over the work to another employee. Due to that reason, we accepted the resignation immediately and asked that employee not to come from 1st June. The employee agreed and didn’t come from 1st June. Now, the employee is asking for one month's (June) salary. He mentioned that he is ready to serve a one-month notice period. His last day of employment is 30th May. Is the company liable to pay?

Certainly, YES, if he had stated that he would serve for one month as per the terms of appointment. At the same time, if the terms of appointment are silent about the notice period, then he cannot ask for one month's salary. Now, it has become like the employer is asking him to go, and in such a scenario, he should be compensated for the lost salary.

Madhu.T.K

Hi Rakesh,

In the normal course, the minimum notice period is one month, which will vary from company to company based on the grade and level of the employee. Please check the terms and conditions of the appointment order, which has been issued on the separation clause. Also, clarify whether the employee had made any request for early relief or showed reluctance in serving the notice period.

If he had requested to leave immediately and you had needs for backup and handover, would you have asked him to pay the one-month salary to buy out the notice period? Contracts are not based on scenarios and situational priorities. Check the facts, and you may have to pay him one month's salary if that is agreed as per the appointment letter. If you have not issued him a relieving letter yet, then you can negotiate with him to work for 30 days from now and pay one month's salary. Time lost in June until now can be considered as non-paid leave, as generally there is no leave in the notice period, and the notice period also extends for this leave period. This will not show a gap in his resume for the next job, and you will not have to pay for non-productive time.

This is, of course, if you have work for him and want him to work further for you after resignation. Since he is a junior-level employee, there should be no problem.

Best Regards,
Amod.

Dear Member,

It is not candidate interest; it is based on the terms and conditions of the appointment letter. If the company has a provision of one month notice pay vice versa, then he is entitled to get one month notice pay.

Reviewing Clauses in the Appointment Letter

Kindly check what clauses are mentioned in the Appointment Letter regarding the Separation of Services. You should have one signed copy of the letter from the employee in question. If the letter does not specify notice period payments, then there is no need to compensate the employee for that. If you have not yet provided the employee with the relieving and experience letter, then instruct them to work for an additional month before compensating them accordingly, indicating an extension in their resignation or notice period. Since the employee is at a junior level, it is unlikely that they will raise significant issues regarding this matter.

Good luck!

I do not agree with Ashwini's presumption that if he is a junior-level employee, he will not create many issues. Rather, I would like to say that if he is a junior-level employee, you should be very careful because the provisions of the Industrial Disputes Act will help such employees.

It is also interesting that Rakeshmba, who started this thread with his concern, is not responding despite us asking for clarifications about what is written in the appointment order regarding the separation clause!

Regards,
Madhu.T.K

Dear all,

In the appointment letter, there is a one-month notice period. The concern here is that the company does not want to continue with the employee and does not intend to pay the salary for the month of June. The employee is requesting to serve the notice period and receive payment for the month of June as per the notice period salary.

Thank you.

Appointment Terms and Notice Period

Please refer to the terms of his appointment. Normally, the appointment letter will state that if you wish to leave the organization, you must provide one month's notice or one month's salary in lieu of one month's notice on either side. If this is specified in the appointment letter, the company is obligated to pay one month's salary because the employee has submitted their resignation and expressed a desire to continue working in your organization. As management, you have only prevented the employee from coming to the office after the resignation has been submitted.

Hi Amod,

I would like to correct you on one of the points you made as follows:

It is not necessary in this case to get an extension for the notice period, and we cannot deduct the salary. The employee was not absent; he was told not to come, and hence the absence. There is a difference. As an HR professional, we cannot play double standards to our benefit. We need to be careful to follow laws to set an example for others. I am, however, open to understanding your viewpoint on this as well.

Notice Period and Compensation

The provision for one month's notice is for the company to find a replacement and mitigate the loss as the aforementioned employee is leaving the organization upon submitting their resignation. It is not mandatory to pay the employee for a period in which they did not work.

If the company is terminating an employee against their will, the company is obligated to provide compensation.

The way the HR department maintains relationships with employees is reflected in these situations. A skilled HR professional should be capable of handling this scenario in a manner that demonstrates care for the employee.

Thank you.

Clarification on Notice Period and Salary Payment

Madhu T.K., I have clearly mentioned that he is asking for a salary for one month because the company released him immediately at the end of May. He himself is ready to continue for one month to serve the notice and to receive his June month's money. However, as mentioned by Rakesh, he actually does not have any work to do in the office. This clearly shows that he is just concerned about his money; otherwise, he would have informed them about the separation clause in the appointment letter while asking for his salary.

Further, as Mr. Rakesh said, the appointment letter has the clause to give notice for one month. They can clearly ask him to serve additional notice to receive the salary for June, or they can simply pay him the money in lieu of notice. Before accepting the resignation in this manner, HR should check the terms and conditions mentioned in the appointment letter to avoid such issues.

Hi Ankita, This is not a case of double standards. The HR department is also composed of humans, and there are instances when negotiations are needed beyond the boundaries of policies. Such incidents provide continual learning for HR policies.

With the present case experience, this HR department will now never ask any contracted employee to leave without serving the notice period if they do not want to pay them. However, in the incident that has already happened, the 6-8 days of June that are already gone cannot be left unaccounted for. This will be difficult to sort out for both the employee and the organization. Hence, the suggestion was to mutually agree for it to be non-paid (or paid, if the policies allow) leave. If it is paid leave, then there will be no issue, but the employee's leave balance will reduce unnecessarily (Monetary loss?). If it is unpaid leave, then for the company to pay the employee for one month's salary, the notice period would extend for these leave days.

This will provide justice for the payment the company is making, and there will be no 'gap' in the employment record for the employee. This should be very much in line with company ethics, and I do not see any reason not to negotiate this solution with the employee. Only, as I have already mentioned, this is only possible if the company has not yet issued a relieving letter to the employee.

Now, as per Rakesh's latest post, the company acknowledges the contract for a one-month notice period and agrees to the notice period buyout option, but also, "company not want to continue that employee and don’t want to pay salary of June month". I do not think this argument is really logical. If the employee is persistent, they may have to end up paying this one-month salary to the employee.

I always end my replies with "Best of luck" in such queries, but this time my wishes are with the employee...

Best Regards, Amod.

Hi Ankita,

You have quoted:
Please explain under which law it is permissible to include a clause in an employment contract that requires an employee to pay for the buyout of the "notice period" during which they are not providing services to the organization. Is it also legal for a company to pay such an amount to an employee in the same scenario?

Point well taken, Mr. Amod, but the salary we pay in lieu of not serving the notice is actually the opportunity cost.

Usually, the company takes that because there will be some disruption in the work whilst you are away, and they have not placed someone to take over since you are leaving early.

These are the clauses usually put up in the appointment letter.

Many times when employees are planning to move on, they keep their line managers in the loop, saying they are looking for growth opportunities.

(Saying so after speaking to many candidates. And let me tell you, I am working in a consultancy, speaking to many people every day.)

In such cases, the employee will get early relief and may not also have to pay the amount.

But when an employee wakes up in the morning and resigns, wanting to be relieved in a few days' time... what can the company do?

Surely the company can't force him to stay back, especially when he is not willing to work... but they can surely ask him to compensate for the loss they will have in his absence until they look out for someone.

I hope I have tried to solve the doubt.

Regards, Ankita

Dear team,

Please follow the terms and conditions as mentioned in the appointment letter that was issued to employees. Proceed accordingly.

Thank you.