Is It Fair for Companies to Cut Your Salary During Probation Without Notice or Agreement?

Greetings! This is my probation period in this IT company. During the last two months, there was really not much work assigned to me as I was working from home as asked by my boss. But now, they have deducted 60% of my monthly salary from the last two months without any prior notice or discussion. At the time of joining, I had only received an offer letter which has no mention of the span of the probation period or any terms or conditions letter attached to it. It was more like plain text consisting of the mention of my monthly in-hand salary and the last date of document verification and joining. Now, when I inquired about the deducted amount with my HR, he mentioned that it is in their HR policy, which is still unknown to me since I have not received any terms and conditions letter from their side so far. My question is, can they deduct from my monthly salary without any prior discussions only because I'm on my probation period? Thank you.

Dear Lalita,

Salary and Employment Contracts

Salary is the monetary compensation payable to the employee for the services rendered during a specific wage period, as agreed in the contract of employment. Whether it is work from home (WFH) or at the workplace, when work is assigned to an employee, regardless of its quantity, the employee is at the disposal of the employer. Therefore, the employer cannot unilaterally decide to reduce the agreed salary under the pretext of insufficient work. The status of the employee, such as being a probationer or a confirmed employee, does not give the employer a free hand to reduce the predetermined salary. Certainly, it is a clear breach of the terms of the contract of employment and an illegal deduction under the Payment of Wages Act, 1936, if applicable.

Dear Lalita Joshi,

This is in addition to what Mr. Umakanthan M has written. He has given his reply from a legal perspective.

Appointment Letter Issuance

You have mentioned that while joining the IT company, you were issued an "Offer Letter." However, has the appointment letter been issued? This letter is typically provided immediately after the employee joins. An appointment letter is a formal agreement between an employer and an employee.

Salary Reduction Concerns

Reducing the salary of a newly joined employee without their consent does not reflect well on the company. It indicates the mindset of the company's owner. While HR may provide a justification for a policy under which the salary has been reduced, it is often perceived that employers use HR as a scapegoat. HR may offer superficial justifications to protect the company's image.

Options Available

You have two options now. The first one is to fight for your rights. For this, you may submit an application to the MD of the company for the restoration of your salary. If he does not reconcile, then you are free to approach the Labour Officer of your area. Please note that I am recommending approaching the Labour Officer and not a labour lawyer.

The second option is to accept it as your fate and move on. However, it is not easy to continue with bitterness at the very beginning of your tenure. Whether to continue with the employment or not will depend on your financial needs and other domestic responsibilities.

General Comments on Management Practices

Half a century has passed since management science recognized "human" as a resource. This resource does not depreciate, and by harnessing its power, companies worldwide have made significant progress. On the other hand, many companies believe they can progress by trapping unsuspecting employees. Progress and business expansion depend on the trust that employees place in their employers. Unfortunately, not many employers understand the power of trust, and that is a tragedy.

Thanks,

Dinesh Divekar

True, an employer is not expected to reduce salary without assigning reasons and without taking the employee concerned into confidence. If any employer does so, the employee can approach the labor department. However, in practice, this may not work well, especially in highly organized industries supported by employer associations. In this scenario, considering the employee is in the IT sector, approaching the labor department could lead to potential blacklisting and harm the employee's career, given the visibility and influence of IT company associations. Some employers even resort to publicly shaming employees on platforms like LinkedIn, which can complicate matters further when HR relies heavily on such platforms for recruitment.

Issues Specific to IT Employees

Another issue specific to IT employees is that they may have managerial approval rights that exempt them from certain labor laws safeguarding workers, such as the Industrial Disputes Act or the Payment of Wages Act. If such an employee lodges a complaint with the Labor Officer and the management asserts the Officer lacks jurisdiction, it can create a deadlock. Hence, it is advisable to seek a bilateral settlement between the employee and the employer before pursuing legal action.

Vulnerability During Probation

The employee's position is particularly vulnerable during probation, where employers are generally not allowed to reduce salary. Terminating an employment contract solely because an employee questioned a management decision to cut salary reflects poorly on ethical standards. However, if the employment contract explicitly states that termination during the probation period can occur "without notice and without assigning any reasons thereof," a termination letter without specifying a reason would hold legal validity.

Employer-Employee Relationship and Legal Protection

You should have accepted the offer and returned a copy to the company. That is enough to establish an employer-employee relationship. As already mentioned, you have legal protection only if your position in the company is similar to a worker. Otherwise, you will have to approach a civil court for breach of contract.

Salary Reductions During COVID Lockdown

I am assuming that the case is during the COVID lockdown period. Many companies have reduced salaries as they do not have revenue and cash flow due to the impact of the lockdown. Some companies have simply removed people, which in the case of probation, is very easy.

At least, you still have a job, though at lower pay during a difficult position.

Dealing with Unprofessional Pay Cuts

I agree it is unprofessional of the company not to inform you in advance of pay cuts during the WFH period. It is up to you to decide your course of action. If you don't like what they have done, then search for a new job and leave. During probation, you probably don't need to give notice either. If you want to stay, go to the top person in the company and express how you do not appreciate the way they have handled this situation and how you would have been happy to comply if they had just bothered to inform you.

The last option is to demand you get paid the full amount and threaten legal action, but that method of burning bridges is not something I would recommend to anyone without a specific reason to justify it.