Can Employers Legally Deduct Salaries? Seeking Clarity on Salary Deductions

Dear All,

Can the employer deduct the employee's salary for any reason? Please let me know if it is legal.

Thanks,
Firoj Attar

Understanding Debit Notes in Employee Salary Deductions

A debit note is issued to an employee if they have been paid excess wages, bonuses, or allowances. The issuance of a debit note is part of the recovery process.

Additionally, a debit note may be issued to an employee to recover costs resulting from a mistake on the part of the employee. For instance, if a restaurant captain under-bills a customer, a debit note could be issued to recover the losses. However, it is advisable to conduct an inquiry before initiating such recovery processes.

Clarification on the "Debit Clause"

The reason for titling the post as "Debit Clause" is unclear. Are you intending to include a debit clause in the appointment itself? If so, this would be incorrect. The issuance of a debit note could be a standard operating procedure of the Accounts Department, outlining the authorized personnel for issuing debit notes and the sequence of activities.

The issuance of a debit note is an official communication to the employee regarding the deduction of a certain amount from their monthly wages. This communication helps reduce queries from employees regarding underpayments. Deducting an amount directly from an employee's salary without issuing a debit note is considered a poor practice and may attract the attention of the Labor Officer during regular payroll inspections.

Thanks,

Dinesh Divekar

I agree with Mr. Dinesh. An employer can debit, but before doing so, they must justify the action and communicate it to the employee. The payroll team can debit the salary as per the norms and policy because, at the time of auditing, they have to provide justification with supporting documents.

I would like to request Mr. Firoz to please elaborate on the question as it is not clear in which sense you are asking it. The Debit Clause cannot be added as a point in the appointment letter or on the salary slip.

Regards,
Rajesh Pradhan
HR Department (B L Kashyap & Sons Ltd.)
[Phone Number Removed For Privacy Reasons]

Employer's Right to Recover Losses

Why stipulate it as a clause in the letter of appointment when the employer has the inherent right to recover any loss or damage caused to their property or any excess amount paid to an employee? Non-mentioning of a debit clause in the letter of appointment, in my view, does not deprive the employer of this right. However, it is advisable to issue a notice to the employee regarding the recovery and provide them with an opportunity to explain their case in accordance with the principles of natural justice since the decision to recover can adversely affect the employee. Even the Payment of Wages Act permits recovery for loss, damage, unauthorized absenteeism, etc.

Regards, B. Saikumar

Dear Sir,

Thank you very much for your prompt reply. I also want to inquire if it is appropriate to debit a certain amount from an employee's account in cases where the employee has made a mistake leading to a delay in the process or causing other employees to lose time.

Thank you,
Firoj Attar

Dear Firoz,

What you are asking in your second post is about imposing a penalty on an employee for his alleged misconduct and the losses arising out of this misconduct. Before taking disciplinary action, you need to conduct a domestic enquiry. If the misconduct is proven, then to recover the penalty, you may issue a Debit Note.

Your original question was about the Debit Clause. I had given a reply regarding the Debit Note. However, to issue a Debit Note, you need to have sufficient grounds.

Thanks,
Dinesh Divekar

You need to figure out whether the delay is due to any act of sheer neglect or negligence on the part of the employee or due to environmental factors which the employee does not have any control over. If your conduct rules consider it as misconduct and you have evidence of it, you can take disciplinary action after issuing a show cause notice spelling out the circumstances and impose any appropriate penalty specified in your rules after being found guilty in a domestic inquiry. However, if the incident is of slight neglect, it is advisable to counsel the employee first and warn him against it initially before resorting to disciplinary action since such incidents are of a common nature.

Regards, B. Saikumar