Is It Fair to Deduct Salary as a Security Deposit to Prevent Sudden Employee Departures?

Hello experts,

I am an HR professional at a private coaching institute in Pune, Maharashtra. The team size is 45 (including teachers and non-teaching staff) distributed across 4 centers. I am currently facing an issue with employees leaving the organization without serving the notice period.

I have observed in my previous experiences that common reasons for abrupt departures include health issues, family emergencies, and instances of absconding. Given the specialized skills of each employee within our small-scale organization, which render them irreplaceable, it is crucial for us to focus on employee retention. Recently, an employee left a day after receiving their salary, citing family reasons.

Would it be justifiable to deduct a portion of an employee's salary as a form of security deposit?

Would it be justifiable to deduct a portion of an employee's salary as a form of security deposit and then reimburse it with interest only at the time of the Full and Final settlement, contingent upon them serving the notice period?

Hi, Please find out the actual reasons for employees leaving without information. You may try to reach them over the phone and discuss the reasons. Conduct periodic one-on-one sessions to get feedback, especially from new joiners.

To promote long-term employment

I suggest introducing a Retention Bonus based on the Grade. Let it be outside of the CTC salary, and the amount will accumulate on a monthly basis but will be paid to the employee upon completion of a certain time period. For example, 50% after completing one year and another 50% upon completion of the second year. This way, employees might be more inclined to continue for the sake of receiving the bonus amount.

While the frustration of employees leaving without serving notice periods is understandable, implementing a policy to cut a portion of their salary as a security deposit might not be the best solution. Such a practice could raise legal and ethical concerns, and it may not be well-received by your employees. Instead, consider the following alternatives to address this issue:

Clear Communication and Policies

Ensure that your notice period policy is clearly communicated to all employees during the onboarding process. Make sure they understand the importance of adhering to the notice period and the consequences of not doing so.

Exit Interviews

Conduct exit interviews with employees who are leaving to understand their reasons for not serving the notice period. This feedback can help you identify any organizational issues that might be contributing to this problem.

Flexible Notice Periods

Consider offering flexible notice periods based on individual circumstances. This could include shorter notice periods for employees facing genuine emergencies or health issues.

Encourage Open Communication

Create an environment where employees feel comfortable discussing their plans to leave in advance. Encourage them to communicate any potential issues that might affect their notice period, allowing the organization to plan accordingly.

Retention Strategies

Implement retention strategies to create a positive work environment that encourages employees to stay. This could include career development opportunities, competitive compensation, work-life balance, and employee recognition programs.

Non-Compete Agreements

You can introduce non-compete clauses in employment contracts that prohibit employees from joining competitors for a specified period after leaving. However, these agreements should be legally valid and enforceable in your jurisdiction.

Consider Offering Notice Pay

If employees are leaving without serving notice, consider recovering the notice pay amount from their final settlement.

Legal Consultation

Consult with a legal expert to ensure that any policies or actions you take are compliant with labor laws and regulations in your region.

It's important to remember that retaining employees involves creating a positive work environment and addressing their needs and concerns. By focusing on improving employee engagement, communication, and organizational culture, you can work towards reducing instances of employees leaving without notice.

Dear Priti Parchure,

If employees are leaving without serving a proper notice period, it is called abandonment of employment. You need to identify the root cause of this problem. Why do they do it?

Reasons for employee abandonment

One reason is the lack of loyalty towards the organization. However, loyalty is not a one-way street. If one expects employees to be loyal, then fairness demands loyalty to the organization by the employer as well.

Organizational culture and its impact

The second reason is the unsuitable culture of the organization. What kind of culture does your organization have? Are the employees treated properly? How is the interpersonal environment in the company? Do the whims and fancies of the managers or the top boss rule the roost?

Caution money as a solution

You have come up with the idea of taking caution money from the employees. The money will be paid provided they complete the notice period. However, this formula may not work in all cases. Those who wish to abandon employment will have no qualms about forgoing the security deposit. What if they rationalize the loss and move on?

Addressing employee attrition

Most companies grapple with the challenge of employee attrition. Your challenge is one level up. The only remedy I can suggest is to conduct a survey of the organization's culture. In fact, the survey is also not required because the reasons for employee abandonment are well known. However, the survey just validates and uncovers the known truth.

Thanks,

Dinesh Divekar

Creating long-term employment in the coaching industry involves a tailored approach that considers the unique dynamics of the Indian job market and cultural context. Here are specific strategies to help you achieve this goal:

Focus on Purpose

Emphasize the meaningful impact that coaching has on students' lives. Align employees with the organization's mission to foster a sense of purpose and commitment.

Career Growth Path

Provide clear career progression paths for employees. Offer opportunities for promotions, skill development, and leadership roles within the coaching organization.

Skill Enhancement

Offer regular training and skill development programs to enhance employees' teaching and coaching abilities. Invest in continuous learning to keep them motivated.

Work-Life Balance

Promote a healthy work-life balance by implementing flexible work arrangements and encouraging employees to take breaks to recharge.

Recognition and Rewards

Recognize and reward employees for their achievements and contributions. Publicly acknowledge their successes and milestones.

Competitive Compensation

Provide competitive salaries and benefits to attract and retain top talent. Regularly review and adjust compensation to match industry standards.

Inclusive Work Environment

Foster an inclusive and diverse work environment that respects different backgrounds, perspectives, and experiences.

Performance Feedback

Conduct regular performance evaluations to provide constructive feedback and guidance for improvement. Recognize and celebrate achievements.

Employee Empowerment

Involve employees in decision-making processes and give them ownership over certain aspects of their roles. Empowered employees are more likely to stay long-term.

Employee Well-Being

Prioritize employee well-being by offering wellness programs, counseling services, and initiatives that promote mental and physical health.

Open Communication

Maintain open lines of communication with employees. Listen to their concerns, ideas, and feedback and take action to address their needs.

Stable Work Environment

Provide a stable work environment where employees feel secure about their job and the future of the organization.

Personal Development Plans

Collaboratively create personal development plans for employees, outlining their growth trajectories and skill enhancement.

Team Building

Organize team-building activities and events that strengthen relationships among colleagues and create a sense of camaraderie.

Job Satisfaction

Regularly assess employee satisfaction levels and identify areas of improvement. Address any issues promptly to maintain a positive work environment.

Leadership Development

Invest in leadership development programs to cultivate strong leaders who can inspire and guide teams effectively.

Mentorship Programs

Establish mentorship programs where experienced educators guide and support newer employees, fostering a sense of community.

Quality Work Environment

Provide modern facilities, technology, and teaching resources that contribute to a comfortable and efficient work environment.

Transparency

Be transparent about organizational decisions, changes, and future plans. This helps build trust and confidence among employees.

Feedback Loop

Establish a feedback loop that allows employees to share their suggestions, concerns, and ideas for improvement.

By combining these strategies with a genuine commitment to employee well-being and growth, you can create an environment that encourages long-term employment and loyalty in the coaching industry.

Thanks, Lakshmi. Instead of monthly deductions, can 50% be taken from each of two consecutive salaries? This adjustment is proposed because the employee I mentioned only received the first salary before departing. In such instances, the amount deducted as part of the retention bonus could serve as a penalty. Please advise.

Hi Priti,

Legally speaking, an employer cannot hold any part of the wages/salary earned by workers/employees to retain the employees in the service. As a shortcut, if you are fixing a ₹30,000 CTC for an employee, allocate ₹1,000 for a Retention Bonus, which will be part of the CTC. So, the CTC is ₹29,000 plus ₹1,000 as a Retention Bonus. Make it clear in writing that the Retention Bonus will be paid only upon completion of a specific period.

Retention Bonus as a Strategy

A Retention Bonus is just a small move to reduce attrition. If the working environment is not congenial, if there is no opportunity for growth, if work hours are excessive, or if salaries are paid late, employees will tend to leave, regardless of retention bonuses. Even if everything is smooth, one or two employees may abscond without notice, which is natural. However, if the numbers are high, you need to conduct research and development to bring in measures to address the situation.

Employee Departure and Notice Period Compliance

Leaving employment is the will of the employee. An employee may leave one job for another with a better package or facility. Employees who are leaving should honor the terms of employment; failing to do so is a gross violation.

Legal Measures and Employment Clauses

Don't let them go this way; instead, send them a legal notice claiming payment in lieu of notice. Consider changing the employment clause or implementing a bond with a clause requiring payment twice the notice amount if the employee leaves without notice. There are several procedures to address this issue, taking into account the reasons why employees are leaving their jobs.