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himanshi-srivastava
In India, is there any clause anywhere regarding holding some percentage of the salary of an employee monthly, just to ensure that the employee will serve a notice period and there will be no absconding cases especially in the case of mid and higher-level employees
From India, Mumbai
Madhu.T.K
4197

No, there is no such law in India. But in respect of an employee who is not covered by Payment of Wages Act or whose salary does not exceed Rs 24000 per month, you can make a contract with the employee to the effect that there will be deduction of certain amount towards a fund which will be paid only at the time of proper handing over. It is the employee/ candidate to decide whether to accept such offer or not. If the offer letter contains such a clause, don't accept it.

In the case of employees coming under the Payment of Wages Act, only deductions as per section 7 are permitted. That permitted deductions any way do not include deduction for adjustment of notice period in future.

From India, Kannur
Dinesh Divekar
7855

Dear Himanshi Srivastava,

I wish you had provided sufficient background information on your query. Are you going to join a company that will deduct caution money every month? Are you the HR professional of the company who will start deducting caution money from future employees?

Part of the last sentence of your post says: there will be no absconding cases, especially in the case of mid and higher-level employees.

If the caution money is deducted under the notion that it will act as a deterrent and help curb the absconding cases, then it is a myth. Regardless of the deduction of a certain amount, those who wish to abandon employment will do it anyway, Abandonment of employment is a result of the distaste or bitter feelings toward the organisation. When people make decisions under frustration, they do not worry about the monetary losses but reconcile themselves with them.

What if the problem of abandonment of employment persists despite the deduction of some amount from the salary? What would be the next step then?

Companies from across the industry spectrum grapple with the problem of employee attrition. However, your problem is severe because it is not just routine separation but abandonment of employment. The sudden absence of employees could throw operations out of gear, which, in turn, could result in customer dissatisfaction.

The abandonment of employment is generally restricted to the lower level of the hierarchy or even at the lowest level, the workers' level. But you say that "mid and higher-level employees" abandon the employment. This exacerbates the severity of the problem and shows that irrespective of the level, the employees are highly disengaged. Therefore, the malaise lies in the lack of allegiance or disaffiliation toward the organisation. Rather than employing quick-fix solutions like the deduction of money, you need to fix the root cause. Otherwise, your company will be seized by this challenge perpetually.

Thanks,

Dinesh Divekar

From India, Bangalore
saswatabanerjee
2383

Further to what Mr. Dinesh said,
1. Do the employees trust the company to give that money back later?
Most will not and just consider it as if they are getting lesser salary. Their willingness to join or to switch jobs will be consider that amount they get and not what the so called 'gross' salary is.

2. If the next job gives a good jump, they will not care about the pending amount. Very few are foolish enough to take that into account and wait.

3. How do you propose to show it in income tax, PF, ESIC, PT?
Is it showing as payable to the employee or are you accounting only the actually paid part?
If you are showing proper gross wages, you are actually liable under law to pay it, even if the employee 'absconds'
In fact the deduction may be a ground for absconding and courts or labour commissioner may consider it as valid ground.

From India, Mumbai
Agarwal BD
6

Rather than holding back a part of the salary, giving retention bonus for completing x number of years of service, will motivate employees to continue working with the organization.
From India, Kolkata
Dinesh Divekar
7855

Dear Agrawal BD,

People quit the company because of the lack of growth opportunities or toxic work culture. It is a myth that increasing remuneration will hold them back. You have recommended the payment of the retention bonus. But instead of relying on a once-a-year payment, whether you call it a retention bonus or otherwise, consider that the salaries of all the staff just doubled. Do you think that by doubling the payment, the problem of abandonment of employment will be reduced? Instead of the abandonment of the employment, at best people may start quitting by completing the notice period. But then the problem of attrition will persist.

If the disease lies with the organisation's culture, then the remedy is curing the disease, not the symptoms.

Business owners have a deep-rooted myth that people work only and only for money. They disregard the importance of building the organisation's culture. This is because paying money is a quick-fix solution, but building a culture requires patience. It is a long-drawn process without any shortcuts!

Thanks,

Dinesh Divekar

From India, Bangalore
himanshi-srivastava
Thank you members who have replied and given me some valuable insights regarding my question. Your thoughtful responses have not only helped me but also countless others who seek guidance and support on this topic.I am an HR, so I just wanted to know about this area of HR as I am have been in recruitment only. I have asked many of my HR friends about this question so one of them has said that now a days companies are making such clause in appointment letter so as to curb the loss due to such situation. That's why I am seeking expert guidance for my questions and really want to thank you members for helping me.

Regards.

From India, Mumbai
Agarwal BD
6

Dear Mr Dinesh Divekar,
I get your point which is an ideal world situation, but in today's world no employee will spend his/her lifetime with one organization even if the work culture is great. When organizations recruit freshers and spend their time and money training them, there is a minimum period they would expect these employees to stay with them after the training so that they can start contributing back to the organization. Retention bonus in such cases works as a motivator.

From India, Kolkata
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