Navigating Salary Cuts During Notice Period: Are There Legal Risks for COVID-19 Measures?

Salary Reduction During Notice Period

I am working as an HR in an SME IT company with a strength of 50 employees. One of our employees, ABC, resigned in the first week of February 2020 and is currently serving the notice period; his last working day is 15th April. Due to the unprecedented situation of COVID-19, the company has asked everyone to work from home and announced cost reduction measures. It has been decided to defer a percentage of employee salaries for the next 3 months, which will be paid next year if certain revenue targets are achieved.

I suggested to management not to deduct employee ABC's salary as he is serving the notice period. However, management responded that this decision applies universally to all employees, whether working or serving notice periods.

Legal Implications of Salary Reduction

My question is: Does this salary reduction apply to employee ABC, considering he is already serving the notice period and will not be staying until next year? Are there any legal implications to this decision?

Please guide me.

In my opinion, it is not advisable to reduce or deduct his salary since he has already resigned. The government has clearly issued a directive to pay employees' salaries in full during the lockdown period without any deductions under the Disaster Management Act. Furthermore, all terminal benefits of the employee must be settled immediately upon leaving the company.

Therefore, any deductions at this stage will only expose the company to potential litigation under the Disaster Management Act and the Industrial Dispute Act of 1947. I advise paying the full salary without any deductions.

Regards

Hi Partner,

The employee can sue the company for discrimination or retaliation on the grounds that he has resigned and is leaving the company.

While proceeding on a pay cut to the rest of the employees, there is at least an implicit communication that at a later stage they shall be receiving the differential amount.

But as long as there is no special clause for employees serving their notice period, it can turn out that the company is exploiting the situation for profit.

As per the government guidelines, it is not advisable to reduce or deduct the salary of an employee who has already resigned. All terminal benefits of the employee must be settled immediately before they are relieved from service.

The decision of the board of directors is not binding and may be considered an act of vindictiveness. If the employee is subjected to such actions, they can pursue legal action. The company can be held accountable for violating government advisories, such as the Disaster Management Act and the Industrial Dispute Act of 1947.