Hi all,
I need some help/advice. We have a startup company. We have noticed that people leave the organization without serving the notice period. To retain employees, we have added a retention bonus in the CTC, but it doesn't seem to be effective. We have included the retention bonus as one component in the monthly salary structure, deducting some amount from the gross salary. For example, if the salary is 20000, we are paying 19000, and one thousand is shown as a deduction. This amount will be paid after a year, with the employer contributing the same amount as well. So, the total retention bonus will be 24000 upon completion of the year.
Is this approach acceptable, or could there be legal issues? Please advise.
From India, Samalkha
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1I need some help/advice. We have a startup company. We have noticed that people leave the organization without serving the notice period. To retain employees, we have added a retention bonus in the CTC, but it doesn't seem to be effective. We have included the retention bonus as one component in the monthly salary structure, deducting some amount from the gross salary. For example, if the salary is 20000, we are paying 19000, and one thousand is shown as a deduction. This amount will be paid after a year, with the employer contributing the same amount as well. So, the total retention bonus will be 24000 upon completion of the year.
Is this approach acceptable, or could there be legal issues? Please advise.
From India, Samalkha
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There will be no legal issue if both parties ( Employer and employee) agrees, only request is make a proper agreement with clear conditions and same communicated to employees also.
From India, Surat
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From India, Surat
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Dear Jugnu,
No, legally, you cannot withhold any part of wages/salary earned by workers/employees just to retain the workers/employees in the service. It is not a statutory component; however, as per the Payment of Wages Act, the entire wages/salary should be paid to the employee within 7 days after the completion of the month if the employee strength is below 1000. If the employee strength is 1000 or above, the salary should be paid within 10 days or before after the completion of the month. Additionally, for existing employees, this component may cause a dispute as per Sec 9A of the ID Act, as it is a change in service condition. Therefore, including such a component is not legally valid.
First, you need to figure out why employees are not being retained in their service for long; there must be a reason for the same. In case an employee/worker leaves the job without serving the notice period, then you can demand the money in lieu of the notice period as stated in your offer letter/certified standing order. Also, you can withhold his/her Full & Final settlement. Always remember, employees are free to work anywhere after providing the notice period and completing the period of notice. No employer can force any employee to remain in the service by executing a service bond and deducting some part of the employee's salary; hence, such a component cannot legally stand.
Thanks & Regards,
Devesh Chauhan
Practicing in Accounts, Finance, Taxation & Labour Laws
From India, Basti
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No, legally, you cannot withhold any part of wages/salary earned by workers/employees just to retain the workers/employees in the service. It is not a statutory component; however, as per the Payment of Wages Act, the entire wages/salary should be paid to the employee within 7 days after the completion of the month if the employee strength is below 1000. If the employee strength is 1000 or above, the salary should be paid within 10 days or before after the completion of the month. Additionally, for existing employees, this component may cause a dispute as per Sec 9A of the ID Act, as it is a change in service condition. Therefore, including such a component is not legally valid.
First, you need to figure out why employees are not being retained in their service for long; there must be a reason for the same. In case an employee/worker leaves the job without serving the notice period, then you can demand the money in lieu of the notice period as stated in your offer letter/certified standing order. Also, you can withhold his/her Full & Final settlement. Always remember, employees are free to work anywhere after providing the notice period and completing the period of notice. No employer can force any employee to remain in the service by executing a service bond and deducting some part of the employee's salary; hence, such a component cannot legally stand.
Thanks & Regards,
Devesh Chauhan
Practicing in Accounts, Finance, Taxation & Labour Laws
From India, Basti
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Dear Mr. Jugnu,
Please find attached a copy of sub-section 6 of Section 1 of the Payment of Wages Act, 1936. According to this section, the Act is applicable only to persons employed and receiving wages up to Rs 10,000/= (please note that I am not certain about the latest amendment). Therefore, I suggest retaining good employees through your innovative methods and systems.
Regards,
N. Nataraajhan
Sakthi Management Services
Hp: +919483517402
Email: natraj@sakthimanagement.com
From India, Bangalore
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Please find attached a copy of sub-section 6 of Section 1 of the Payment of Wages Act, 1936. According to this section, the Act is applicable only to persons employed and receiving wages up to Rs 10,000/= (please note that I am not certain about the latest amendment). Therefore, I suggest retaining good employees through your innovative methods and systems.
Regards,
N. Nataraajhan
Sakthi Management Services
Hp: +919483517402
Email: natraj@sakthimanagement.com
From India, Bangalore
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Dear Jugnu,
First of all, you need to find out the reasons behind employees leaving the organization and not sticking to their jobs. Of course, you have a remedy if they leave you without giving notice or pay in lieu thereof, as there always exists a clause or condition in their appointment letter. I agree with Sh. Devesh Chauhan that such deduction shall not be in order. Such deduction shall also violate the provisions of the Payment of Wages Act, 1936, as it shall be taken as an illegal deduction under the Act. You can add anything from your side to motivate the employees but can't deduct from their salary without their written consent.
You can make a questionnaire and take feedback from the employees leaving the organization about their likes and dislikes of the organization and suggestions for improving the work environment.
BS Kalsi, Member since August 2011
From India, Mumbai
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First of all, you need to find out the reasons behind employees leaving the organization and not sticking to their jobs. Of course, you have a remedy if they leave you without giving notice or pay in lieu thereof, as there always exists a clause or condition in their appointment letter. I agree with Sh. Devesh Chauhan that such deduction shall not be in order. Such deduction shall also violate the provisions of the Payment of Wages Act, 1936, as it shall be taken as an illegal deduction under the Act. You can add anything from your side to motivate the employees but can't deduct from their salary without their written consent.
You can make a questionnaire and take feedback from the employees leaving the organization about their likes and dislikes of the organization and suggestions for improving the work environment.
BS Kalsi, Member since August 2011
From India, Mumbai
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Dear Jugnu,
You have the option of showing a $24K bonus in his CTC payable at the end of the calendar/financial year and showing his salary as $19K. By doing this, you do not dishonor any act (if the employee agrees).
Secondly, you can hold the employee's F&F settlement until the completion of the notice period or the salary for the notice period as mentioned in the appointment letter. In case you have such a trend in your organization, make sure you increase the notice period slightly to control it. Strictly follow the notice period clause of the appointment.
Moreover, by doing this, you are not addressing the root cause. Have a proper "Employee Engagement Survey" which will cost you hardly anything and reach the actual cause of employees leaving you. If that is addressed perfectly and the correct preventive actions are taken, you will not need to seek such loopholes. Consider that 10% of employees are disengaged at any time in the organization, but addressing this can work for 90% of the remaining employees.
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You have the option of showing a $24K bonus in his CTC payable at the end of the calendar/financial year and showing his salary as $19K. By doing this, you do not dishonor any act (if the employee agrees).
Secondly, you can hold the employee's F&F settlement until the completion of the notice period or the salary for the notice period as mentioned in the appointment letter. In case you have such a trend in your organization, make sure you increase the notice period slightly to control it. Strictly follow the notice period clause of the appointment.
Moreover, by doing this, you are not addressing the root cause. Have a proper "Employee Engagement Survey" which will cost you hardly anything and reach the actual cause of employees leaving you. If that is addressed perfectly and the correct preventive actions are taken, you will not need to seek such loopholes. Consider that 10% of employees are disengaged at any time in the organization, but addressing this can work for 90% of the remaining employees.
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Dear Jugnu,
Instead of recovering Rs. 1000/month, if you pay the company's share of Rs. 1000 x 12 = Rs. 12000 on completion of a year as ad hoc (not as a retention allowance), I think this supports a goodwill gesture, and employees will appreciate it.
The problem of attrition should be analyzed and corrected, as other members emphasized above.
While recovering from monthly dues is not legally correct, you should instead find a permanent solution to your attrition based on a diagnostic study.
Regards,
RDS Yadav
Labour Law Advisor
Email: navtaranghrs@gmail.com
From India, Delhi
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Instead of recovering Rs. 1000/month, if you pay the company's share of Rs. 1000 x 12 = Rs. 12000 on completion of a year as ad hoc (not as a retention allowance), I think this supports a goodwill gesture, and employees will appreciate it.
The problem of attrition should be analyzed and corrected, as other members emphasized above.
While recovering from monthly dues is not legally correct, you should instead find a permanent solution to your attrition based on a diagnostic study.
Regards,
RDS Yadav
Labour Law Advisor
Email: navtaranghrs@gmail.com
From India, Delhi
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On the same topic, we have framed a RETENTION BONUS Policy, which we want to start from 1/4/2019. For retaining the employee for at least 3 years, Fresh Trainee Engineering Diploma or graduate Engineering, we would like to add Rs. 3000/- to his salary every month and deduction for the same amount as R.B. (retention Bonus) and Rs 1,08,000/- (3000X36 = 1,08,000) will be paid after three years. Till that period, we will keep aside as a R.B. If he leaves within three years, then this amount he has to forfeit. We want the legal status on this R.B. whether we can or not, or in another name, we can do this. As we are showing his payslip as R.B.
For example, we are giving Trainee Engineer Rs. 11,500/- per month as a gross salary. Deductions will be of P.F./E.S.I./P.T. but we will not show any deduction on R.B. - Rs. 3000/-. What heading can we give if R.B. is not legal? Suggestions from the Higher Committee of CITEHR. Can you help me? This policy is not for experienced employees, only for the freshers, as my company is a channel partner of an international company. Trainees get good training being the channel partner of an international company. So, they try to leave the job within a year or two, and hence this policy.
Jayant Nisal
7875757963
From India, Pune
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For example, we are giving Trainee Engineer Rs. 11,500/- per month as a gross salary. Deductions will be of P.F./E.S.I./P.T. but we will not show any deduction on R.B. - Rs. 3000/-. What heading can we give if R.B. is not legal? Suggestions from the Higher Committee of CITEHR. Can you help me? This policy is not for experienced employees, only for the freshers, as my company is a channel partner of an international company. Trainees get good training being the channel partner of an international company. So, they try to leave the job within a year or two, and hence this policy.
Jayant Nisal
From India, Pune
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