Is It Fair to Deny Variable Pay to an Employee Who Left Before Payout Month?

Dear Professionals, I have a query. An employee worked in an organization from 2009 to mid-July 2022 (14 years) in the same organization. He held a mid-level position and was eligible for variable pay. The variable pay period is from July '21 to June '22, and the payout is in July '22. He served a notice period from 16th May '21 to 15th July '22—two months as per policy—and was relieved on 15th July in an agreed and mutual exit. He received his salary for working 15 days in July. However, the variable pay was not paid. He was informed that he is not eligible because he is not on the payroll during the payout month. There is no written policy, oral communication, or any communication on the same to any employees until now. Please let me know your inputs on whether the employee is eligible for variable pay.

Thanks

The stance that an employee serving a notice period is not on the rolls is patently wrong and grossly unjust. The employee remains on the company's rolls until they are officially relieved, which extends to midnight of that day. The company's rules and regulations apply to the employee until they are finally relieved from service.

Revised VDA Application
As far as the organization is concerned, the revised VDA applies from July 1, and the old VDA ceases to apply on June 30. There cannot be a selective extension of benefits to those continuing in the organization while denying them to employees on notice period. This is discriminatory and patently illegal.

I am aware of the widespread practice of denying many due benefits to resigned employees, but it is incorrect and illegal.

Variable pay is also part of the CTC, so it must be paid to the concerned employee. Yes, it's another thing that it may differ according to his performance or as per the standard for variable pay, but not paying is an injustice.

This is actually a software error or deficiency. Logically, the HR Manager should speak to accounts and get the amount paid. Since the employee has worked for a long time, it would be better if he could just speak to a senior manager and try to get it resolved. Trying to take a legal route for a half-month variable pay is a bad idea, especially since the new company will come to the old one for a BGV. So it is always good to work it out on a good note.