Are These Employment Conditions Fair? Discussing Salary Withholding and Work Hours in Pvt Ltd Companies

Our office has working hours from 9:30 to 6:30, and all Saturdays are working, but timings are 9:30 to 5 pm. Additionally, we keep half the salary of the employee for the first month, which is only returned after the completion of one year. Are these valid conditions for a Pvt Ltd company? Kindly explain.

Under the Delhi Shops and Establishment Act:

Section 8. Employment of adults, hours of work - No adult shall be employed or allowed to work about the business of an establishment for more than nine hours on any day or 48 hours in any week, and the occupier shall fix the daily periods of work accordingly.

So you are fine there. However, retention of wages is wrong both in the Shops Act and the Payment of Wages Act. For details.

This is a kind of employee retention strategy. Many companies are following such a strategy. Apparently, the company must have an agreement with the employee accepting the same before joining. Any verbal communication regarding withholding salary amounts will be null and void. However, any terms and conditions stand based on cordial relationships with each other.

Even if there are such terms and conditions, they are null and void as they are opposed to public policy.

The legality of retaining half a month's salary can be assessed depending on how it is communicated to the employee. Suppose, while issuing the appointment letter, it is mentioned that for the first month, the salary will be "X," and from the second month onwards, it will be "2X." In that case, I do not think that it can be questioned. This is because the terms and conditions of employment are specified in the appointment letter, and the employee accepted those. Therefore, grumbling at a later stage is not worthwhile.

Retention of Salary: Legal Considerations

Moving further, many employers communicate about the retention of 50% of the salary at the time of recruitment itself, and later they include this provision of deduction and disbursement after one year in the letter of appointment. Would any law prohibit doing this? As long as the minimum wages are paid in the first month, everything is fine!

Thanks,
Dinesh Divekar

Lack of Formal Employment Agreements

In many cases, appointment letters are not issued, especially in local shops and commercial establishments. Often, salary records are not maintained on paper. Instead, a lump-sum amount is recorded in account books under salary/wages without specific names. These are typically verbal agreements, where employment is contingent on the employer's satisfaction. If the employer is dissatisfied, they can dismiss the employee at will, and it is up to the employer to decide whether to pay the retained salary. Without a written agreement, employees have no legal recourse, as their names do not appear in any records. Consequently, employees often forgo their retained salary to avoid legal complications, which can be time-consuming and impractical for them.

Exploitation of Workers

Commercial establishments often operate from 9:00 AM to late hours. Employees frequently do not receive compensation for working beyond 8 hours, which constitutes worker exploitation. This situation should be monitored by the labor department. However, it is often observed that labor department officials are off duty, sometimes seen shopping during working hours.

Regards

Duration of work mentioned is not wrong. Regarding salary, as others have mentioned, it depends on what is stated in your offer or appointment letter. Additionally, if you are under training for the first month, there are terms and conditions that support this. Even if this information has not been directly communicated to you, if it has been documented in such a way that you have signed off on it during the recruitment process - because that is when you sign all the papers without reading them.

Any retention and deduction, as you have described, is a violation of sections 6 and 7 of the Payment of Wages Act. Most of the Shop and Establishment Acts also provide similar rules. Whether communicated before or not, it is illegal. These laws are intended to prevent the exploitation of workers who can't stand up to employers.

Retention Bonus Conditions

The only way this would be allowed is if the appointment letter had only 50% of the salary mentioned as the actual salary and provided for a retention bonus of one year's salary upon completion of a year of service.

Regards