Can Employers Legally Hold a New Joiner's Salary for 15 Days Over 6 Months in India?

Can any employer hold the salary of a new joiner for 15 days for 6 months and then release it? Is it legal in India?

What are you holding? It is not legal to withhold employees' salaries.

Sir, I am working in a BPO. To control the attrition rate, my employer withholds the salary because many candidates abscond after training. The employer releases the salary after completion of 6 months, but if an employee absconds, they do not receive the salary that was held. Is this legal?

Also, now my employer is thinking of not releasing the salary of those employees whom we are terminating on non-performance grounds. Is it legal? Can any employer hold or not release salary if an employee gets terminated for not performing?

Sir, I am working in a BPO. To control the attrition rate, my employer withholds the salary because many candidates abscond after training. The employer releases the salary after completion of 6 months, but if anybody absconds, that employee does not receive the salary that is being held. Is this legal?

Kindly guide me on this.

Thank you

I am working in a BPO. To control attrition, my employer holds the salary because many candidates abscond after training. The employer releases the salary after the completion of 6 months, but if anybody absconds, that employee does not receive the salary that is on hold. Is it legal?

Also, now my employer is considering not releasing the salary of employees terminated for non-performance reasons. Is it legal for an employer to withhold or not release the salary if an employee is terminated for poor performance?

Kindly guide me on this.

Thank you.

Sir, I am working in a BPO. To control attrition, my employer holds the salary because many candidates abscond after training. The employer releases the salary after the completion of 6 months, but if anybody absconds, that employee does not receive the salary which is kept on hold. Is it legal?

Comments: Is the salary paid every month or not? Is it paid at the end of the six months? If it is paid at the end of the six months, then it is illegal. You may approach the Labour Officer (LO) of your area for non-payment of wages.

Also, now my employer is considering not releasing the salary of those employees whom we are terminating due to non-performance. Is it legal? Can any employer hold or not release salary if an employee is terminated for not performing?

Comments: It is mandatory to pay the salary until the Last Working Day (LWD) of each employee. Under-performance cannot be the grounds for non-payment of wages. Inform your management about the provisions of the Shops and Establishment Act of your state. If an employee reports to the LO, inform your employer that the LO takes a stern view of this.

Final Comments: The problem with the BPO sector is that they often operate as if they are above the labour laws. The second issue is that many employers are ignorant of the basics of labour laws. Generally, their advisor on labour matters is their Chartered Accountant (CA). Not all CAs are experts in labour laws, but they may pretend to be to retain their clients.

Thanks,

Regards, Dinesh Divekar

Business Mentor, Consultant, and Trainer

Whatever you are saying is illegal. There are many other retention strategies. It is better to follow those strategies rather than withholding the salary.

On the face of it, it looks illegal on the grounds of natural justice. However, recent judgments have favored the employers' precautions as legal. There is a saying that the salary payer should try to keep his employees as per the company work manual. If anyone disobeys, they lose their rights. This is the law of the land. Serious violations should always be dealt with by labor laws. However, training periods, discipline, misconduct are gone through by individual company's work manuals only.

It is illegal to withhold salary, especially if the salary is being withheld solely to prevent the employee from leaving the service. Furthermore, an employer cannot refuse to pay the employee's 15 days' salary when the employee's service is terminated.

Thank you!

Thank you very much for your guidance, sir. I just wanted to ask a question: Is it mentioned in any law or act that an employer cannot withhold salary for any reason?

Employers hold the salary of new employees for 15 days for the first six months because attrition is high in the BPO industry, and they invest time and money in training. This policy allows them to recover the withheld amount from the salary if an employee absconds. Employees who abscond do not receive any payment.

IT industries/ BRO are mostly covered under the Shops & Establishment Act, and according to it, salary has to be paid by the 7th-10th day of the next month. Any delay is illegal and against the law.

"Any reason" is a vague term. However, employers cannot withhold salary to penalize an employee.

Understanding Salary Withholding Laws in India

There are laws that clearly state you cannot withhold the whole or part of anyone's salary. The first applicable law is the Payment of Wages Act, the second one is the Minimum Wages Act, and the third is the Shop and Establishment Act applicable to your state. Read each one, and you will find the provisions very clearly stated.

If you have a person working for you, you have to pay them regardless of whether they are able to deliver or not. If you are spending time and effort training them instead of putting them to work, that is your problem, not theirs. The law requires you to pay them on time every month. There is a clear provision that the maximum salary period is a month and no longer. These provisions apply regardless of whether the individual is a permanent employee, in training, on probation, or any other designation you can think of. Even those appointed under the Apprentices Act are required to be paid.

Regards, anonymous

Legal Precepts and Salary Obligations

Legal precepts always emerge from moral principles obtaining in social intercourse. Therefore, apart from the statutory restrictions imposed on the minimum quantum, the process of timely disbursement of salary/wages, and the determination and proportion of deductions that can be normally effected therefrom, salary or wages are the prime consideration in the contract of employment.

The obligation of the employer to make payment of salary arises only after the fulfillment of the obligation by the employee to render their services. Thus, it is a consequential or counter-obligation cast upon the employer that cannot be simply brushed aside based on feigned reasons or fanciful imaginations such as attrition.

Regards

Thank you, everyone, for the guidance. I shared the inputs given by all of you, but my employer asked me about his previous company where they used to hold salary and gratuity, etc. However, that company never faced any problems, and no employee complained about it, as many of them are not aware of labor laws or are simply least bothered. Additionally, to date, they have been following the same practice of withholding 15 days' salary for 6 months and releasing it after successful completion, while not paying employees who go absconding or are terminated.

I am genuinely concerned about this wrong practice and feel saddened for those employees who are not receiving their rightful pay for the days they worked. Kindly guide me on how to convince my management.

Thanks

Instead of holding the salaries, it's preferred to plan alternative strategies to retain employees. You can plan for retention allowances, etc.

Violation of Section 5 and Section 7 of the Payment of Wages Act requires sending a notice, i.e., if you do not want to work with them, or approach the inspector under the statute.

Understanding Legal and Ethical Considerations in Salary Withholding

Seeking legal redress is an ultimate option subject to statutory limitations on the quantum of the maximum salary. On the contrary, since both the poster and the employer genuinely understand that withholding a sizable portion of the salary earned by employees for some time to reduce the attrition rate is still an unethical practice, whether agitated or not by the affected employees, why don't they try to understand the reasons for attrition and take positive steps to remedy the situation? It is said that employees do not leave companies but managers. Any employee's innate aspiration for a comparable hike in the compensation package commensurate with timely career advancement cannot be undermined.

The Importance of Human Resource Accounting in India

In India, barring a few companies such as Bharat Heavy Electricals Ltd, Steel Authority of India Ltd, SPIC, Madras Refineries Ltd, ONGC, and Infosys, which reflect the value of their human resources in their annual reports, most companies do not give importance to Human Resource Accounting. Unfortunately, the majority of employers are more interested in business growth rather than organizational development. The development of employees is an inherent and integral part of the development of organizations. The development of employees is, therefore, more a matter of learning than earning. Politely insist on these points to your CEO at the appropriate moment.

Dear All,

One more query I have, please reply to this as well. We terminate employees who are not performing. My management is not giving PL encashment to those employees who are getting terminated in probation because of non-performance or underperformance. Is it legal? Can they refuse to give PL encashment if they terminate a probationer for not performing or not meeting the expectations? Kindly guide me on this.

Thanks.

Since yours is an ITES establishment, your state's Shops and Establishments Act would be applicable. Generally, paid leave would be eligible only after completion of 12 months of continuous service. Since only probationers are terminated, their service would be less than 12 months, and as such, there is no illegality in the denial of encashment of paid leave on termination.