Notice Period Dilemma: Should We Hold Salary for Both Months or Just One?

Dear Seniors, A company has a two-month notice period, and the employee has to serve the complete notice period. Should we hold his salary for the entire two months or release the first month's salary and hold the second month's salary? Please advise.

Thanks,

Meenu

Hi, Holding off salary during the notice period is not ethical and goes against labor laws. However, many leading companies follow this practice of withholding salary during the notice period and releasing partial payment for monthly expenses. The rationale behind this is that many employees have a tendency to leave work abruptly (after submitting their resignation) without any notice after receiving their salary. By retaining a portion of their salaries, employers aim to ensure that employees fulfill their notice period as required.

In your situation, considering your company's two-month notice period, it would be unreasonable to expect an employee to go without salary for that duration. Therefore, you may consider withholding a percentage of the salary, such as 10-20%, and releasing it along with the full and final settlement.

Holding salary during the notice period is basically illegal. However, there are cases when the employee has an outstanding loan to be repaid, and the employer instructs to adjust it from the pending salary. In situations where the employee does not communicate how to repay the loan amount, salary holding is common in many organizations.

Otherwise, it is always wise to pay the salary due to the employee on time.

S K Bandyopadhyay (WB, Howrah)
CEO - USD HR Solutions
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