Consultant Resigned After Taking Advance: Are We Legally Right to Withhold Salary?

Hi, we recruited a consultant who had worked for 5 years. Recently, he resigned. Two days before resigning, he availed an advance of Rs. 50K from the company. We were not aware that he would leave the company; it happened all of a sudden. The salary for the month worked was held by the company. Now, the consultant wants us to settle the salary, but we denied it and told him to settle the advance. He is saying that he will take legal action. Please guide us on whether the stand we have taken is right or if there are any legal issues.

Hi, whatever the outstanding amount due to be paid by the employee/consultant can be recovered/adjusted from the full and final amount payable to the concerned. Even if the consultant goes legally, you should have proof of the 50k transfer against which FFS was kept on hold. To be on the safer side, you can send a demand notice to the consultant to settle the advance amount of Rs. 50,000. If the FFS payable is more than 50k, then you may mention in the letter stating that "if you fail to settle the advance amount on or before ____, then the same will be recovered from your FFS, and the balance amount alone will be paid."

One observation is that you claim that the consultant had worked for 5 years. Whether he had worked on a full-time basis as an employee or on a retainer contract basis? The reason being, considering his 5 years of continuous service, there are chances of the consultant making a demand for gratuity.

Our seniors have already suggested that if you have proper proof, you can send a letter for settlement. This kind of incident serves as a learning experience for us. It is important to keep reviewing, clarifying, and improving our policies to minimize such occurrences in the future.