Can a Company Deduct Salary Overpayments After an Employee Leaves? Let's Discuss!

Dear All,

My company gave an increment to an employee, but he didn't accept it. Nonetheless, the company credited an incremented salary to his account for 2 months. The employee received another job offer, served his notice, and left. Upon his full and final settlement, the company deducted the 2-month increment difference, citing that it was a mistake.

Is it possible for such a mistake to occur for 2 months?

Can they take such action? According to labor law, is it permissible for a company to do this—would it be considered acceptable?

No, it is unfair for the company to deduct the increment amount already paid to an employee following their resignation. The increment is given based on past performance, and this act cannot be justified. It is also clear that an employee does not have the choice to accept or reject the increment given. If the increment is denied, it can be challenged. The employer owes an explanation as to why the increment was denied.

Recovery from salary can be made in case of excess payment. In this case, the increment was due and was given. Most probably, had the employee continued in service, it would have also remained in the salary. Recovering the increment paid is a bad HR practice, unethical, and improper.

Annual Increment and Ethical Practices

Annual increment is given for performance during the previous year and is not a matter of negotiation, so there is no question of non-acceptance of increment. I have known of some organizations deliberately delaying their declaration of increments by a few months so that they do not have to pay those who change jobs at the beginning of the new financial year, which is also ethically incorrect. However, it is grossly unethical for the organization to recover the increment amount already paid.

Hi, did the employee sign the increment letter? Nowadays, employers typically include a clause stating that in case of resignation within _ months from the effective date of resignation, the company reserves the right to revoke the increment amount. Please check whether the employee signed an increment letter with such a clause.