Can Companies Demand Notice Pay Based on Bonuses and Benefits? Let's Discuss!

HR Folks - I request your views on the process of Separation/Exit.

Can an organization recover the notice pay from an employee based on Gross CTC, which also includes the bonus component, loan benefits, Gratuity, and other benefits as a part of the CTC? I think this shouldn't be done as Gratuity is an amount to be paid to the employee if they serve the organization for at least 5 years. In today's scenario, it's not reasonable to expect an employee to necessarily stay with a company for 5 years. Additionally, the bonus component is the maximum guaranteed amount, which is not necessarily earned by the employee 100%. So, is it possible to recover notice pay on such non-fixed components?

Also, if an employee resigns within a month of joining, can the organization demand that the employee serve the notice period of 2-3 months or provide notice pay alternatively?

In a situation where an employee is willing to pay the notice pay, can the organization still hold back the employee and ask them to serve the entire notice period rather than recovering the notice pay?

Dear Manya,

The process of notice pay deduction is entirely based on the company's policy. The amounts of gratuity, bonus, etc., which are not part of the monthly components, are generally settled separately. The deductions are made for the monthly components, and then you can settle the annual components.

In the case of a new joiner, you cannot force people to stay back but can request them to stay until the full knowledge transition is completed for the person replacing them. However, that would be their own individual decision.

You can hold back their experience certificate, but instead, the person can show their salary slip elsewhere.

If the company chooses to hold back instead of recovering the notice pay, it may not force the individual to return to the company. As mentioned before, there are other ways for individuals to demonstrate their experience in the organization apart from the experience certificate.

Hope this will help you.

Just to add to what Ananya has said, if an employee has decided to leave without serving his notice period, then you can hold back his salary for the previous month. In case he informs you after the salary is credited, then you need to ask him to give back the salary for last month or serve the notice period. If an exit clause is added to the appointment letter, that serves a good purpose in such situations.

Most of the companies today do reference checks. You can suggest to the company that if any such check is done, you will inform the checking company that the employee has left without giving proper notice. Withholding the experience letter is one more way.