Is It Legal to Pay Off My Contractual Obligation in Installments After Resigning Early?

Good day. I seek guidance regarding my decision to terminate a 2-year employment contract after serving 1.5 years. I'm now serving the two-month notice period, and HR sent me the breakdown of the company compensation.

Contractual Obligations Upon Resignation

The contract stipulates that if an employee resigns before completing the full term, they are obligated to pay the salary in lieu of the remaining employment period. In my case, this would amount to 5 months' salary.

Inquiry on Legal and Payment Options

I am inquiring about the legality of this provision and whether it is permissible to settle the compensation in installments. Your professional advice on this matter would be greatly appreciated.

Validity of Employment Contract Clauses in India

In India, this kind of clause in the appointment order will be invalid. However, depending upon the nature of employment and the functional responsibilities the employee has, the contract can be made enforceable. Accordingly, if you have been working as a manager with functional responsibilities of a manager in reality and not just by designation, the contract is final, and the employer can recover any costs from the employee.

At the same time, if you do not have any functional responsibilities of a manager, you would fall under the scope of the Industrial Disputes Act, and your employment will be protected. Therefore, the clauses of the appointment order (contract of employment) will not supersede the provisions of the ID Act.