Hi Everyone,
I am working for an Indian IT company. Currently, I am in the US with my spouse on Leave without pay. Due to some personal reasons, I had to resign from my job, so I submitted my resignation, and my supervisor approved the same. Since I am unable to leave the US, i.e., going back to India to serve the notice period of 3 months, I opted to buy out my notice period. To buy out, my employer is asking me to pay 3 months' gross salary, which amounts to around 2.5 lakhs, a very high amount. This includes Basic pay (~35,000) + HRA (17,350) + Special Allowance (26,000) per month.
My employer does not have clearly defined policies. No policy document clearly states the procedure for buying out the notice period. Furthermore, when my employer's HR team prepared the FnF Statement, they made numerous mistakes in calculating the amount, which I had to point out to get corrected. When I inquired why I need to pay 3 months' gross pay, they referred me to a point in my offer letter. However, nowhere does it specify that the payment should be based on Gross salary. As per industry standards, most companies ask for the basic salary to buy out the notice period.
In my offer letter, the point under Notice period reads as follows:
"Notice Period: On confirmation, your appointment with the Company will be subject to termination with 3 months' notice or payment in lieu thereof. Should you desire to resign, you shall provide the Company with a prior written notice of a similar period or payment in lieu thereof. In case of disciplinary proceedings, the Company reserves the right not to accept your resignation. If you choose to resign, you shall make yourself available during office hours for a period from the date of resignation as required by the company for a smooth transition."
Please note that it states "payment in lieu thereof." Just payment. What does this really mean? Nowhere does it specify that the payment should be based on Gross salary, just a payment.
Please advise on how I can proceed. I am willing to pay to buy out my notice period but not the gross salary, as I have been on Leave without pay for the past 4 months.
Looking forward to your responses.
Thanks,
Victor.
From United States, Denver
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I am working for an Indian IT company. Currently, I am in the US with my spouse on Leave without pay. Due to some personal reasons, I had to resign from my job, so I submitted my resignation, and my supervisor approved the same. Since I am unable to leave the US, i.e., going back to India to serve the notice period of 3 months, I opted to buy out my notice period. To buy out, my employer is asking me to pay 3 months' gross salary, which amounts to around 2.5 lakhs, a very high amount. This includes Basic pay (~35,000) + HRA (17,350) + Special Allowance (26,000) per month.
My employer does not have clearly defined policies. No policy document clearly states the procedure for buying out the notice period. Furthermore, when my employer's HR team prepared the FnF Statement, they made numerous mistakes in calculating the amount, which I had to point out to get corrected. When I inquired why I need to pay 3 months' gross pay, they referred me to a point in my offer letter. However, nowhere does it specify that the payment should be based on Gross salary. As per industry standards, most companies ask for the basic salary to buy out the notice period.
In my offer letter, the point under Notice period reads as follows:
"Notice Period: On confirmation, your appointment with the Company will be subject to termination with 3 months' notice or payment in lieu thereof. Should you desire to resign, you shall provide the Company with a prior written notice of a similar period or payment in lieu thereof. In case of disciplinary proceedings, the Company reserves the right not to accept your resignation. If you choose to resign, you shall make yourself available during office hours for a period from the date of resignation as required by the company for a smooth transition."
Please note that it states "payment in lieu thereof." Just payment. What does this really mean? Nowhere does it specify that the payment should be based on Gross salary, just a payment.
Please advise on how I can proceed. I am willing to pay to buy out my notice period but not the gross salary, as I have been on Leave without pay for the past 4 months.
Looking forward to your responses.
Thanks,
Victor.
From United States, Denver
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Normally, notice pay or the payment of salary in lieu of notice shall mean to include only Basic Salary and DA, if applicable. This shall be the same if the employer wants to terminate the service of an employee. Since you do not fall under the definition of a workman/employee under labor laws pertaining to such disputes (specifically the Industrial Disputes Act), a cross-reference is not possible.
In such circumstances, it would be appreciated to refer to the certified Standing Orders of the company. In the absence of these, it shall be understood as Basic Salary only.
To support your stand, you can say that if you had been eligible for gratuity, it should be basic salary only that could have been taken into account for calculating your gratuity. Similarly, if, on your leaving, you had encashed the balance of leave, it should have been done on your basic salary and not on gross salary. In the same way, notice pay shall only mean basic salary for the required months (in your case three months).
Regards,
Madhu.T.K
From India, Kannur
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4482In such circumstances, it would be appreciated to refer to the certified Standing Orders of the company. In the absence of these, it shall be understood as Basic Salary only.
To support your stand, you can say that if you had been eligible for gratuity, it should be basic salary only that could have been taken into account for calculating your gratuity. Similarly, if, on your leaving, you had encashed the balance of leave, it should have been done on your basic salary and not on gross salary. In the same way, notice pay shall only mean basic salary for the required months (in your case three months).
Regards,
Madhu.T.K
From India, Kannur
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Dear Madhu,
I need your opinion. The employment offer letter contains the clause "In case of resignation by the employee or termination of employment by the employer, three months' notice or pay in lieu of notice has to be given."
Now the question is, one employee has submitted his resignation by giving three months' notice. The employer is willing to relieve him immediately. In this case, is the employee entitled to notice pay?
My view is that the employer insisted on three months' notice from the employee. Now, he is willing to waive it and does not want to insist on that. If the employer calls the employee in the afternoon and tells him that his services are no longer required, then the employee is entitled to get the notice pay.
I have seen some threads about "selling out or buying of the notice period." Hence this request.
KCS Kutty
From India, Madras
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I need your opinion. The employment offer letter contains the clause "In case of resignation by the employee or termination of employment by the employer, three months' notice or pay in lieu of notice has to be given."
Now the question is, one employee has submitted his resignation by giving three months' notice. The employer is willing to relieve him immediately. In this case, is the employee entitled to notice pay?
My view is that the employer insisted on three months' notice from the employee. Now, he is willing to waive it and does not want to insist on that. If the employer calls the employee in the afternoon and tells him that his services are no longer required, then the employee is entitled to get the notice pay.
I have seen some threads about "selling out or buying of the notice period." Hence this request.
KCS Kutty
From India, Madras
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Dear Mr. Kutty,
In my opinion, in this situation, the employer has to pay in lieu of notice. As per the conditions of the appointment, the individual has planned his future course of action and accordingly given a 3-month notice. If the employer relieves him immediately, then he has to pay in lieu of notice.
Regards,
JS Malik
From India, Delhi
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In my opinion, in this situation, the employer has to pay in lieu of notice. As per the conditions of the appointment, the individual has planned his future course of action and accordingly given a 3-month notice. If the employer relieves him immediately, then he has to pay in lieu of notice.
Regards,
JS Malik
From India, Delhi
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Dear Malik,
I have a different opinion on it. When the termination of a contract of employment comes from the employee in the form of resignation, it is up to the employer when to relieve him. If the employer is willing to relieve the employee with immediate effect, then why should the employer pay notice pay to the employee? It will be done on mutual agreement. Taking another view, if the employer serves three months' notice of termination of employment and the employee wants to leave immediately, will the employer demand notice pay from the employee?
My understanding of the notice period is that it is the maximum period required by the employer to find a substitute employee for the one who is leaving. If the employer finds a replacement, he can relieve the employee even before the three months are up. Similarly, the notice period from the employer's side is the maximum period given to an employee to secure alternative employment. If the employee under notice period secures alternative employment, he is free to leave during that notice period without paying notice pay to the employer. In both these circumstances, since the decision to leave or terminate has been made, there seems to be nothing wrong with relieving at an early date.
Regards,
Madhu.T.K
From India, Kannur
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I have a different opinion on it. When the termination of a contract of employment comes from the employee in the form of resignation, it is up to the employer when to relieve him. If the employer is willing to relieve the employee with immediate effect, then why should the employer pay notice pay to the employee? It will be done on mutual agreement. Taking another view, if the employer serves three months' notice of termination of employment and the employee wants to leave immediately, will the employer demand notice pay from the employee?
My understanding of the notice period is that it is the maximum period required by the employer to find a substitute employee for the one who is leaving. If the employer finds a replacement, he can relieve the employee even before the three months are up. Similarly, the notice period from the employer's side is the maximum period given to an employee to secure alternative employment. If the employee under notice period secures alternative employment, he is free to leave during that notice period without paying notice pay to the employer. In both these circumstances, since the decision to leave or terminate has been made, there seems to be nothing wrong with relieving at an early date.
Regards,
Madhu.T.K
From India, Kannur
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Dear Malik Saheb and Madhu,
Thank you both for the prompt reply. I raised this issue because I have seen many posts on this topic. No employer would like to let go of an employee who is a valuable asset to the organization, even in challenging times.
KCS Kutty
From India, Madras
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Thank you both for the prompt reply. I raised this issue because I have seen many posts on this topic. No employer would like to let go of an employee who is a valuable asset to the organization, even in challenging times.
KCS Kutty
From India, Madras
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Dear All, My question from all of you is their any agreement or any format of Salary buy out. If you have could you plz share it with me. Thanks & regards Hemlata Sharma Asst. Manager HR
From India, Chandigarh
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From India, Chandigarh
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Dear Hemalata,
In my humble opinion, there is no prescribed format or any specific agreement formulated under the law for buying out salary. However, it depends on a case-to-case basis, depending on the clause mentioned in the offer letter issued to the potential candidate.
When an employer makes an offer of employment to his potential candidate to join the services as early as possible, which may result in paying a salary in lieu of notice period to the present employer by the potential candidate, the clause may be as follows:
"The Company would reimburse any shortfall in the notice period extended to your present employer, should it result in the payment of salary (mention whether Basic or Gross salary) in lieu of notice upon producing the receipt or any documentary proof of having paid the said amount."
However, simultaneously, you may also include one more clause of repayment of the reimbursed amount by the candidate, in case he leaves the Company within a stipulated time. Failing which it may result in a loss to the Company if the employee leaves within a short span.
The clause may be as follows:
"Whereas, should you leave the services of the Company within THREE Years (just indicative you may change according to your requirement) from the date of your joining, you shall be required to repay the amount so reimbursed in the following manner:
a) first year of your joining = 100% of the amount reimbursed
b) second year of your joining = 75% of the amount reimbursed
c) third year of your joining = 50% of the amount reimbursed
d) thereafter = Nil."
Kindly note: There is no need to have a separate letter drafted for this purpose; you may include the same in the Offer letter issued to the candidate.
Hope this meets your requirement.
Regards,
Sharath M. Kumar
12.11.2010
From India, Bangalore
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In my humble opinion, there is no prescribed format or any specific agreement formulated under the law for buying out salary. However, it depends on a case-to-case basis, depending on the clause mentioned in the offer letter issued to the potential candidate.
When an employer makes an offer of employment to his potential candidate to join the services as early as possible, which may result in paying a salary in lieu of notice period to the present employer by the potential candidate, the clause may be as follows:
"The Company would reimburse any shortfall in the notice period extended to your present employer, should it result in the payment of salary (mention whether Basic or Gross salary) in lieu of notice upon producing the receipt or any documentary proof of having paid the said amount."
However, simultaneously, you may also include one more clause of repayment of the reimbursed amount by the candidate, in case he leaves the Company within a stipulated time. Failing which it may result in a loss to the Company if the employee leaves within a short span.
The clause may be as follows:
"Whereas, should you leave the services of the Company within THREE Years (just indicative you may change according to your requirement) from the date of your joining, you shall be required to repay the amount so reimbursed in the following manner:
a) first year of your joining = 100% of the amount reimbursed
b) second year of your joining = 75% of the amount reimbursed
c) third year of your joining = 50% of the amount reimbursed
d) thereafter = Nil."
Kindly note: There is no need to have a separate letter drafted for this purpose; you may include the same in the Offer letter issued to the candidate.
Hope this meets your requirement.
Regards,
Sharath M. Kumar
12.11.2010
From India, Bangalore
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Very recently, I came across some Supreme Court verdicts which state that an employee has the right to withdraw his resignation before it becomes effective. Hence, I have developed a variant opinion about what I have already expressed.
In Union of India & Others vs Gopal Chandra Misra & Others, it was held that the general principle is that in the absence of a legal, contractual, or constitutional bar, a 'prospective' resignation can be withdrawn at any time before it becomes effective.
In Balram Gupta Vs Union of India & Anr., the principle laid down in the Gopal Chandra Misra case was summarized as follows: "A complete and effective act of resigning office is one that severs the link of the resignor with his office and terminates his tenure."
In Nand Keshwar Prasad Vs Indian Farmers Fertilizers Cooperative Ltd. & Ors., the Court reiterated that it is open to the employee concerned to withdraw a letter of resignation before the date indicated in the notice of voluntary retirement. It was also observed:
"It appears to us that the law is well settled by this Court in a number of decisions that unless controlled by conditions of service or statutory provisions, the retirement mentioned in the letter of resignation must take effect from the date mentioned therein, and such date cannot be advanced by accepting the resignation from an earlier date when the employee concerned did not intend to retire from such an earlier date."
In Power Finance Corporation Ltd. Vs Pramod Kumar Bhatia, the Apex Court went a step further and observed that "It is now a settled legal position that unless the employee is relieved of duty, after acceptance of the offer of voluntary retirement or resignation, the jural relationship of the employee and the employer does not come to an end."
Shambhu Murari Sinha versus Project & Development India & Another is yet another case that supports the above views.
It is to be understood that once an employee has submitted a resignation, his relieving date cannot be advanced because he has the option to withdraw the resignation before the effective date of his relieving. Therefore, if an employer wishes to relieve him earlier, notice pay should be given, treating it as termination of employment by the employer.
I would appreciate it if Mr. Mallik, Mr. Kutty, and others also share their thoughts on this.
Regards,
Madhu.T.K
From India, Kannur
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In Union of India & Others vs Gopal Chandra Misra & Others, it was held that the general principle is that in the absence of a legal, contractual, or constitutional bar, a 'prospective' resignation can be withdrawn at any time before it becomes effective.
In Balram Gupta Vs Union of India & Anr., the principle laid down in the Gopal Chandra Misra case was summarized as follows: "A complete and effective act of resigning office is one that severs the link of the resignor with his office and terminates his tenure."
In Nand Keshwar Prasad Vs Indian Farmers Fertilizers Cooperative Ltd. & Ors., the Court reiterated that it is open to the employee concerned to withdraw a letter of resignation before the date indicated in the notice of voluntary retirement. It was also observed:
"It appears to us that the law is well settled by this Court in a number of decisions that unless controlled by conditions of service or statutory provisions, the retirement mentioned in the letter of resignation must take effect from the date mentioned therein, and such date cannot be advanced by accepting the resignation from an earlier date when the employee concerned did not intend to retire from such an earlier date."
In Power Finance Corporation Ltd. Vs Pramod Kumar Bhatia, the Apex Court went a step further and observed that "It is now a settled legal position that unless the employee is relieved of duty, after acceptance of the offer of voluntary retirement or resignation, the jural relationship of the employee and the employer does not come to an end."
Shambhu Murari Sinha versus Project & Development India & Another is yet another case that supports the above views.
It is to be understood that once an employee has submitted a resignation, his relieving date cannot be advanced because he has the option to withdraw the resignation before the effective date of his relieving. Therefore, if an employer wishes to relieve him earlier, notice pay should be given, treating it as termination of employment by the employer.
I would appreciate it if Mr. Mallik, Mr. Kutty, and others also share their thoughts on this.
Regards,
Madhu.T.K
From India, Kannur
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Dear Mr. Madhu,
After reading both of your views, there is a strong point for all of us to understand that in the case of resignation or voluntary retirement from the services, an employee has to serve a notice period. The point here to be noted is whether the employee has requested early relieving from the services. If yes, then the employer is at liberty or has the discretion to relieve him on a much earlier date than the actual. If not, as cited by you in a couple of judgments given by the APEX Court, the employer cannot advance the date of relieving unless for want of two reasons, namely:
A. The employer has to pay the employee for the difference in the notice period resulting from early relieving.
B. In the case of any public sector employment (in some cases Private sector), as stated, the employee has every opportunity to withdraw his resignation before the effective date of relieving.
I am stressing this issue because I am facing a similar situation. I was employed as Manager - HR/IR in Syndicate Bank. My notice period is three months in case I put in my papers. I had resigned on 20th Sept '2010 and served the three months' notice to the employer which falls due on 18th Dec '10 without asking for early relieving. However, forcibly and without giving sufficient reason and notice, I have been abruptly relieved on 08th Nov '2010, without paying for the difference in the notice period.
The point to be noted here is that I have neither asked for early relieving nor does my offer letter contain a clause that upon serving such notice period, the Bank can relieve me at an earlier date without any compensation.
There are, once again, two points which I consider as points of argument to put forth my contention:
1. The clause of the notice period cannot be one-sided, where if the employee wants to leave the services, he has to serve a three-month notice, and the employer may relieve him at any time without compensation. It is oppressive in nature.
2. The employee is also losing monetarily as he is deprived of his earnings for such a period as he would be unemployed and cannot join his prospective employer if there is no mutual agreement.
I would be contesting my case on the above two grounds. What is your opinion?
Regards,
Sharath M. Kumar
From India, Bangalore
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After reading both of your views, there is a strong point for all of us to understand that in the case of resignation or voluntary retirement from the services, an employee has to serve a notice period. The point here to be noted is whether the employee has requested early relieving from the services. If yes, then the employer is at liberty or has the discretion to relieve him on a much earlier date than the actual. If not, as cited by you in a couple of judgments given by the APEX Court, the employer cannot advance the date of relieving unless for want of two reasons, namely:
A. The employer has to pay the employee for the difference in the notice period resulting from early relieving.
B. In the case of any public sector employment (in some cases Private sector), as stated, the employee has every opportunity to withdraw his resignation before the effective date of relieving.
I am stressing this issue because I am facing a similar situation. I was employed as Manager - HR/IR in Syndicate Bank. My notice period is three months in case I put in my papers. I had resigned on 20th Sept '2010 and served the three months' notice to the employer which falls due on 18th Dec '10 without asking for early relieving. However, forcibly and without giving sufficient reason and notice, I have been abruptly relieved on 08th Nov '2010, without paying for the difference in the notice period.
The point to be noted here is that I have neither asked for early relieving nor does my offer letter contain a clause that upon serving such notice period, the Bank can relieve me at an earlier date without any compensation.
There are, once again, two points which I consider as points of argument to put forth my contention:
1. The clause of the notice period cannot be one-sided, where if the employee wants to leave the services, he has to serve a three-month notice, and the employer may relieve him at any time without compensation. It is oppressive in nature.
2. The employee is also losing monetarily as he is deprived of his earnings for such a period as he would be unemployed and cannot join his prospective employer if there is no mutual agreement.
I would be contesting my case on the above two grounds. What is your opinion?
Regards,
Sharath M. Kumar
From India, Bangalore
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