Is It Legal for Indian MNCs to Deduct Salary for a Retention Bonus Payable After 3 Years?

Hi, can a multinational company (MNC) in India deduct money from an employee's salary in the name of a retention bonus and give it back after 3 years, even if that is mentioned in the offer letter? Is that legal in India?

Retention Bonus

"Retention Bonus" is a payment by the employer outside the regular salary paid to any key employee to ensure their stay in the organization for a certain period during a crucial business cycle or project. Therefore, I am at a loss to understand such an unheard-of practice of a retention bonus being recovered in advance installments from the current salary of the employees to be paid after three years. It would be better if you could upload a copy of the offer letter in this regard for the perusal of the members.

As rightly said, we need to see the relevant clause in the Offer/Appointment letter. The Retention Bonus in this concern is a future payment, payable only after the completion of three years' service. The deduction of any amount towards payment not yet made is badly conceived and perhaps goes contrary to the very purpose. What would have been appropriate is to put a condition that if the concerned employee leaves before completing three years of service, he will not be entitled to receive the Retention Bonus.

Regards, Vinayak Nagarkar
HR Consultant