Dear Professionals,
Is there any legal aspect for Notice pay?
As per our HR policy, we consider the basic salary of one month in lieu of one month's notice. Some companies follow the gross salary. In our company, rotation is on the higher side, so we decided on the basic salary.
Please advise.
Nimra
From India, Mumbai
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Is there any legal aspect for Notice pay?
As per our HR policy, we consider the basic salary of one month in lieu of one month's notice. Some companies follow the gross salary. In our company, rotation is on the higher side, so we decided on the basic salary.
Please advise.
Nimra
From India, Mumbai
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It is the policy of company. Some companies are following basic + DA and some are considering CTC. It is upto you to fix and the same shall clearly be depicted in the appt letter.
From India, Lucknow
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616From India, Lucknow
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In our HR policy, it is the basic salary, but the employee who was terminated due to misconduct is asking for one month's gross salary. He claims that the company is legally obligated to pay the gross salary. Our company is a new establishment, and we did not provide him with an appointment letter. He joined us three months ago.
Please advise?
From India, Mumbai
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Please advise?
From India, Mumbai
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Hi,
If you have not been given an appointment letter, then you are in any way out of trouble ;-) Though it is not a good practice. :x
This kind of issue is dealt with in detail in the appointment letter. In the case of termination due to misconduct, one may not be paid anything at all - the clause states reasons which may lead to termination. It is only in the case of layoff or non-performance that companies terminate people with salary.
If the company is willing to pay, then the company (or employee) should pay the basic or gross salary as stated in your HR policy. In either case, the rule is the same, i.e., if it is written that basic salary is to be paid by the employee as notice pay, then the company will also pay the basic salary in the case of termination. It is never the case that the employee pays the company basic and the company pays the employee gross salary for termination reasons.
Thanks,
Geeta
From Korea, Seoul
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If you have not been given an appointment letter, then you are in any way out of trouble ;-) Though it is not a good practice. :x
This kind of issue is dealt with in detail in the appointment letter. In the case of termination due to misconduct, one may not be paid anything at all - the clause states reasons which may lead to termination. It is only in the case of layoff or non-performance that companies terminate people with salary.
If the company is willing to pay, then the company (or employee) should pay the basic or gross salary as stated in your HR policy. In either case, the rule is the same, i.e., if it is written that basic salary is to be paid by the employee as notice pay, then the company will also pay the basic salary in the case of termination. It is never the case that the employee pays the company basic and the company pays the employee gross salary for termination reasons.
Thanks,
Geeta
From Korea, Seoul
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Hey Nimz70,
Legally, you are liable to pay only Basic + DA (if applicable); other allowances may be refused, especially when terminating the employee. You should refer to the labor act for guidance if not outlined in your company policy. I suggest you read all acts related to termination clauses rather than expecting direct answers, as this will enhance your knowledge as an HR Executive. :lol:
Ukmitra
From Saudi Arabia, Riyadh
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Legally, you are liable to pay only Basic + DA (if applicable); other allowances may be refused, especially when terminating the employee. You should refer to the labor act for guidance if not outlined in your company policy. I suggest you read all acts related to termination clauses rather than expecting direct answers, as this will enhance your knowledge as an HR Executive. :lol:
Ukmitra
From Saudi Arabia, Riyadh
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Dear Nimra,
Notice pay is as per the exit clause of appointment letter. It is a compensation given by one party (Who broke the contract) to other party because of the breach of contract. Law regarding breach of contract is given in section 73 of Indian contract Act 1872.
Section 73 is declaratory of the common law as to damages. The basic purpose of damages is to put party whose rights have been violated in the same position, so far as money can do so, as if his rights have been observed. When compensation sum is named in a contract as the amount to be paid in case of breach then it is know as liquidated damages. Example in the employment contract. When it damages are not given in contract then it known unliquidated damages in these damages will be defined by court on the bases of reasonableness and facts of the case.
Section 74 contract of contract act deals with liquidated damages and penalty. Whether they compensation amount mentioned in contract is liquidated damages or penalty will be defined by court. Compensation amount mentioned in contract will be maximum damages if court found that amount is not reasonable then it can reduce it because compensation is only given for losses not for penalty but court can not increase compensation amount.
By keeping section 73 and 74 of contract act in view organisation should put reasonable and clear amount in exit clause of appointment letter to avoid legal hassle. It is general law that whenever there is any ambiguity in terms of contract then benefit of doubt will given to party who don’t make(write) the contract. (i.e. party who make the term of contact will suffer) As you know in Indian law there are many definition of wages or salary. Wages defined differently in every act. So it is advisable to clear in appointment letter that whether Salary means basic or gross as a notice pay. If you don’t make it specific and clear than whole purpose of putting liquidated damages in appointment letter is nullified.
For more HR related information: White Eagle
From India, Hyderabad
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Notice pay is as per the exit clause of appointment letter. It is a compensation given by one party (Who broke the contract) to other party because of the breach of contract. Law regarding breach of contract is given in section 73 of Indian contract Act 1872.
Section 73 is declaratory of the common law as to damages. The basic purpose of damages is to put party whose rights have been violated in the same position, so far as money can do so, as if his rights have been observed. When compensation sum is named in a contract as the amount to be paid in case of breach then it is know as liquidated damages. Example in the employment contract. When it damages are not given in contract then it known unliquidated damages in these damages will be defined by court on the bases of reasonableness and facts of the case.
Section 74 contract of contract act deals with liquidated damages and penalty. Whether they compensation amount mentioned in contract is liquidated damages or penalty will be defined by court. Compensation amount mentioned in contract will be maximum damages if court found that amount is not reasonable then it can reduce it because compensation is only given for losses not for penalty but court can not increase compensation amount.
By keeping section 73 and 74 of contract act in view organisation should put reasonable and clear amount in exit clause of appointment letter to avoid legal hassle. It is general law that whenever there is any ambiguity in terms of contract then benefit of doubt will given to party who don’t make(write) the contract. (i.e. party who make the term of contact will suffer) As you know in Indian law there are many definition of wages or salary. Wages defined differently in every act. So it is advisable to clear in appointment letter that whether Salary means basic or gross as a notice pay. If you don’t make it specific and clear than whole purpose of putting liquidated damages in appointment letter is nullified.
For more HR related information: White Eagle
From India, Hyderabad
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Dear Nimra,
Notice pay is regulated by law. It is compulsory under the law that if a person's employment were to be terminated after the expiry of a 6-month period, then he should be given one month's salary.
The Industrial Disputes Act is very clear on this subject and prescribes two months and three months' notice respectively in case of establishments falling under its purview and having a certain number of employees. If your company does not come under the purview of the ID Act, then you shall have to follow either your industry standard practices in that area or else prescribe your terms of employment as per your requirements to curtail turnover.
Regards
From India, Bangalore
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Notice pay is regulated by law. It is compulsory under the law that if a person's employment were to be terminated after the expiry of a 6-month period, then he should be given one month's salary.
The Industrial Disputes Act is very clear on this subject and prescribes two months and three months' notice respectively in case of establishments falling under its purview and having a certain number of employees. If your company does not come under the purview of the ID Act, then you shall have to follow either your industry standard practices in that area or else prescribe your terms of employment as per your requirements to curtail turnover.
Regards
From India, Bangalore
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Hi, On this Mr. Murali Dutt is absolutely right.But it depends on the policy fo the compnay that it how is your policy? But you have to go thru with the policy. Rgds, Rakesh Kashyap
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Hi all,
In our company, we terminated a guy in one and a half months, stating in the termination letter that he could not meet the company's expectations. It is stated in the termination letter that he will be paid one month's salary in lieu of notice.
His appointment letter mentions that upon termination, he will receive one month's salary in lieu of notice. The salary section in his appointment letter indicates that salary and other benefits are detailed in the salary breakup, including Basic Pay, HRA, PF, Travel Allowances, etc.
So, what should we pay the individual? Should it be Basic Salary + DA + HRA, etc., or just the Basic Pay?
Thanks
From India, Bangalore
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In our company, we terminated a guy in one and a half months, stating in the termination letter that he could not meet the company's expectations. It is stated in the termination letter that he will be paid one month's salary in lieu of notice.
His appointment letter mentions that upon termination, he will receive one month's salary in lieu of notice. The salary section in his appointment letter indicates that salary and other benefits are detailed in the salary breakup, including Basic Pay, HRA, PF, Travel Allowances, etc.
So, what should we pay the individual? Should it be Basic Salary + DA + HRA, etc., or just the Basic Pay?
Thanks
From India, Bangalore
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Hi Geeta,
Your answer is in your problem statement. You will pay him Basic Salary + DA + HRA, etc., whatever is due in a one-month salary - going by your appointment letter/termination letter and HR policy. Hiring a candidate and firing him due to non-performance is purely considered a fault in the recruitment process - you could not assess the candidate correctly. So now, on humanitarian grounds too, if you are firing him, then you must pay him one month's salary or notice. Make it clear in your HR policy and appointment letters/termination as well.
Thanks
From Korea, Seoul
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Your answer is in your problem statement. You will pay him Basic Salary + DA + HRA, etc., whatever is due in a one-month salary - going by your appointment letter/termination letter and HR policy. Hiring a candidate and firing him due to non-performance is purely considered a fault in the recruitment process - you could not assess the candidate correctly. So now, on humanitarian grounds too, if you are firing him, then you must pay him one month's salary or notice. Make it clear in your HR policy and appointment letters/termination as well.
Thanks
From Korea, Seoul
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