Can Employers Legally Adjust Salary for Loan Purposes? Seeking Advice on Employee Request

One of our employees is requesting us to provide a salary slip with an excess salary that is more than the actual salary. He is requesting us to credit his salary with the excess amount to his bank account for six months to avail more loan from a bank. He is ready to return the excess salary amount in cash to the company. He requires it for a bank loan and wants to reflect his excess salary in the bank statement for loan purposes. Can the employer legally do this for the employee? Please advise.

Hi, Not at all advisable. Please don't take the risk.

By showing a higher salary than the actual salary and also transferring the higher salary, you are paving the path for the employee to demand it legally from you after 6 months. Additionally, having high salary proof in hand, the employee will look for a better offer and will present a pay slip and bank statement as proof of their current salary. No professional employer will allow this.

By showing a high salary, if the employee is required to pay more Income Tax, the employee might ask you to refund the excess Income Tax amount deducted after 6 months. Will you be able to refund it? Also, if the basic salary is increased, the employer needs to pay a higher contribution to the employee's PF account. How will you recover it?

Primarily, what is the assurance that the employee will return the excess salary paid to their bank account back to the company?

Do not encourage such requests from employees.

Concerns Regarding Salary Increase Requests

On what basis will you increase his salary and reflect the same on the salary slip as well as credit it to the bank? Do you have any increments for the employee? By doing this, you are inviting problems into your life and creating chaos. Can you imagine the employee who is currently just requesting this increase for his own benefits may later claim the same increased salary? They could potentially raise a dispute with various authorities for not receiving the incremented salary. So please do not proceed in this manner.

Increasing the salary will have an impact on all other components of the salary/CTC payable. How will you manage this?