Struggling with Delayed Full and Final Payments: Can We Demand Interest and What Are Our Rights?

My name is Deepesh Jangid, and I joined an organization on 11th May 2017. I submitted my resignation on 20th December 2017 and served the notice period as mentioned in the offer letter, which was 7 days during the provisional period. My last working day in the organization was 27th December 2017. I fulfilled the proper notice period, handing over my responsibilities to colleagues and seniors with appropriate documentation.

On 26th December 2017, I completed the Exit Clearance form and obtained signatures from all departments within the organization. The company provided me with a relieving letter on 1st January 2018 after numerous follow-ups with the HR department. Today marks 40 days since my last day in the organization.

The offer letter did not specify the timeframe within which the company would clear the full and final dues. Following verbal communication with HR, I was informed that the dues would be settled within 45 days, though this was not officially mentioned. However, after discussions with the Finance HOD and HR departments, I was advised to wait for 6 months or possibly longer.

Although the company is capable of releasing the full and final payment, they have not done so. Several employees, including myself, have not received their dues for the past 6 months due to lack of awareness and education. Employees visiting the office for their dues are informed by the HR department that the payment will be made shortly. The company currently holds approximately Rs. 30 lakhs in full and final dues.

Assistance Needed from Experts

I seek assistance from experts in the following areas:

1) What are the regulations concerning full and final dues payment?

2) According to government regulations, how soon must the company release the payment?

3) What penalties does the company face for delayed payments?

4) Can employees request interest if the company delays payment, and if so, what would be the interest rate charged?

The Payment of Gratuity Act

The Payment of Gratuity Act provides for interest at 10% simple interest for any delay in payment of gratuity, and it is considered as delayed payment if not paid within a month.

The Factories Act

The Factories Act states that payment of leave wages has to be made within two days of separation of service. There is no laid-down interest rate in the Act.

The Payment of Wages Act

Similarly, the Payment of Wages Act also stipulates that unpaid wages be paid to terminated employees by the next pay-day. There is no laid-down interest rate in the Act.

Court Decisions on Interest for Delayed Payments

The courts have been allowing interest on delayed payment depending on the Bank Rate of Interest for overdraft purposes.

Hi KK!HR, As I worked in the service industry, the company is running the Government Project 108 Ambulance in Rajasthan. I have been associated with the company for only 8 months. Please also advise on the following points:

1) As per government rules, how many days does the company need to release payment?

2) What kind of penalty charges does the company face in case of a delay in payment?

3) If the company delays payment, can employees ask for interest? If yes, what interest rate will be charged?

I am looking forward to your quick reply!

Thanks and Regards, Deepesh Jangid [Phone Number Removed For Privacy-Reasons]

Dear Deepesh, If the amount of FFS works out to Rs 30 lakh, then certainly you were not working in the worker category. In that case, what was your designation and why did you have to quit with just eight months' tenure?

Since you were working in the service industry, provisions of the Shops and Establishment Act are applicable to you. However, you appear to be in the Manager and above category. Therefore, the only legal remedy available to you is to file a civil suit to recover the outstanding amount.

The quantum amount that you say is outstanding speaks volumes. You have mentioned the date of your exit, but was there turbulence preceding your exit? Were you issued any verbal notice to quit? What are the provisions of your appointment letter? How come you just left with seven days' notice?

It appears that your employers feel that they did not derive any value from the term for which you held a senior position. Hence, they are clinging on to whatever they could have disbursed to you. Telling you to wait for six more months for the clearance of the FFS amount is nothing but saying "No" indirectly.

Thanks,
Dinesh Divekar

Dear Deepesh,

The 7-day notice period seems to be very short for your position. From your post, we are unable to determine whether you were on probation or a confirmed employee. If confirmed, then a 7-day notice period is not correct. There must be some confusion. Please confirm.

Regards,
Suresh

Understanding Employee Entitlements and Interest Claims

In respect of the services rendered by an employee to an employer as per the contract of employment, the primary consideration that is quantifiable in monetary terms and payable to the employee is the wage, salary, or remuneration as agreed in the contract of employment. This entitlement of the employee is enlarged by certain other monetarily quantifiable service conditions both during the currency of the contract or on its termination as introduced by certain labor laws applicable, like the PW Act, 1936, the MW Act, 1948, the PB Act, 1965, the PG Act, 1972, etc. In the event of non-compliance by the employer in respect of time as well as quantum, these enactments have their own in-built redressal measures which provide for the levy of interest for default.

Therefore, in respect of delay or denial of such payments which are specifically covered by such laws, you can claim interest on the amount due as per the related provisions. In respect of any due not covered specifically by any such laws, interest can be claimed on the premise of the breach of the employment contract, for in such a situation the employee becomes a creditor to the employer.

Rate of Interest on Delayed Payments

Regarding the rate of interest, it is fixed in the respective laws based on simple interest of bank rates. Where no rate is fixed, it is for the claimant/employee to quote it with reasonable justification. The employee has to remember that the levy of interest on the amount is only to compensate for the loss due to delayed payment and not otherwise. That's why there is a restriction in the PG Act, 1972, that the total interest amount should not exceed the original claim amount.

Dear Suresh Sir,

I am not a confirmed employee in the organization, and according to my offer letter, my notice period is only 7 days, which I have already served in the organization. I have submitted my resignation with all the required documentation.

Could you please advise on the kind of penalty charges the organization may incur for delayed FFS payment?

Regards,
Deepesh Jangid

Mr. Uma has given a clear reply on the quantum of interest rates. Can you provide a breakdown of Rs 30 lakhs? In what capacity did you work in the company? Has the salary been held up or paid on time for a period of 8 months?

Dear Deepesh,

It seems the quality of your post has confused everyone. Please correct me if I am wrong. By 30 lacs Rs. unsettled FnF, do you mean the uncleared dues of all the employees who resigned to date? Also, from your post, what I understand is that you were working at an executive level.

Please clarify a few things:

- What is your gross salary?
- How much FnF are you expecting?
- What is your designation?
- Does anyone report to you?

Thank you.

Dear Mr. Jangid, after reviewing the entire correspondence, it is confirmed that your company owes you a maximum of 27 days' salary, and you were working in a junior position. You can approach the Government Labour Officer in the area where your company is situated and lodge a complaint for non-payment of your December 2017 salary. You have all the supporting documents, such as the relieving letter, handing over responsibilities, and exit clearance signed by the concerned department, etc. You have a very clear case, but you have confused everyone with improper postings. You have already wasted over two months now; forget about interest and claim your December 2017 salary through the labour department. The Labour Officer will also earn around Rs. 5,000/- by the Grace of Deepesh.

If you are still interested in holding your employer accountable, consult a Labour Lawyer, pay their fees double the amount equivalent to your final dues, and claim interest for your satisfaction.

Best of Luck,

Suresh