High Attrition and Unclaimed Salaries: How Long Can We Hold Before Writing Off?

Dear All,

I am working in a service sector industry with a very high attrition rate. Many times, employees join and leave before completing all formalities, sometimes even before updating their bank details. Every month, around 10-12 employees join without providing proper documents and leave without any intimation. In such cases, we prepare their salaries, but they remain unpaid as these employees rarely come back to claim their salaries. Some employees work for only 1 or 2 days, but when we calculate this over a year, it amounts to a considerable unpaid sum in the books of accounts.

Provision for Unclaimed Salaries

Is there any provision or law that states the procedure for dealing with such unclaimed salaries? How long can we keep such amounts in the books of accounts before writing them off?

First of all, this attrition is not good for the company. Anyway, coming to the point, money needs to be sent to the Labour Welfare Fund of the State after 2 years.

Other learned members can comment.

Dear Hrdarshana, I will assume that you are working as an HR professional from your username. The question you are asking, however, should be more of a concern for the accounts department.

As the learned member has already answered your query, I suggest you pay more attention to the actual issue. In your query, you mentioned that people join without proper documentation. How can they join without providing documents? Then you mentioned that the company has high attrition, and people leave without intimation; that is something you should be concerned about.

Please think it over and try to complete documentation before joining.

Regards

Dear Hrdarshana, first of all, you have mentioned the attrition rate, which is really not good for any organization. You also mentioned employees joining without proper documents, indicating that policies and terms are not at a professional level in the company. First, you should focus on this issue and implement proper documentation and onboarding formalities. You should see a positive effect after some time.

Regarding unpaid amounts, if you have any contact details, you can reach out to collect the outstanding salary amounts. Otherwise, secure all outstanding amounts and deposit them into the company funds or with a labor welfare organization.

Seniors and colleagues may provide further clarification.

Thanks & Regards,

Dear Hrdarshana,

Employer's Liability and Unpaid Accumulations

The employer is absolved from the liability of making payment as soon as it deposits the unpaid accumulation to the Labour Welfare Board. The Board displays a notice in at least two local newspapers and in the establishment in June and December every year for three years, inviting claims from such unpaid employees/workers. If a claim is received within four years from the date of the first notice, the Board shall transfer the amount to the "Prescribed Authority" appointed under Section 15 of the Payment of Wages Act 1936, who will decide the matter. If no claim is received or the claim is refused, the unpaid accumulation/money shall vest in the State (State Government) and shall stand transferred to and form part of the fund.

Unpaid Wages of Deceased Workers

Besides, Section 25A of the Payment of Wages Act 1936 provides that the employer has to deposit unpaid wages of a deceased worker where there is no nomination to the said "Prescribed Authority" under the PW Act 1936, who will deal with the matter as prescribed. In your case, if a nomination has been made under the Payment of Wages (Nomination) Rules 2009, the unpaid amount may be paid to the nominee of the employee with no hassles.