In India, is there any clause regarding holding a percentage of an employee's salary monthly to ensure that the employee will serve a notice period and prevent absconding cases, especially for mid and higher-level employees?
From India, Mumbai
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From India, Mumbai
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No, there is no such law in India. But concerning an employee who is not covered by the Payment of Wages Act or whose salary does not exceed Rs 24,000 per month, you can make a contract with the employee stating that there will be a deduction of a certain amount towards a fund which will only be paid at the time of proper handover. It is up to the employee/candidate to decide whether to accept such an offer or not. If the offer letter contains such a clause, do not accept it.
In the case of employees covered by the Payment of Wages Act, only deductions as per section 7 are permitted. These permitted deductions do not include deductions for the adjustment of a notice period in the future.
From India, Kannur
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4767In the case of employees covered by the Payment of Wages Act, only deductions as per section 7 are permitted. These permitted deductions do not include deductions for the adjustment of a notice period in the future.
From India, Kannur
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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 distaste or bitter feelings toward the organization. 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 organization. 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
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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 distaste or bitter feelings toward the organization. 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 organization. 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
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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 a lesser salary. Their willingness to join or to switch jobs will be to 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 labor commissioner may consider it a valid ground.
From India, Mumbai
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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 a lesser salary. Their willingness to join or to switch jobs will be to 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 labor commissioner may consider it a valid ground.
From India, Mumbai
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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
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From India, Kolkata
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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 organization's culture, then the remedy is curing the disease, not the symptoms.
Business owners have a deep-rooted myth that people work only for money. They disregard the importance of building the organization'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
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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 organization's culture, then the remedy is curing the disease, not the symptoms.
Business owners have a deep-rooted myth that people work only for money. They disregard the importance of building the organization'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
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Thank you to the 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 professional, so I just wanted to know more about this area of HR as I have been primarily focused on recruitment. I have asked many of my HR friends about this question, and one of them mentioned that nowadays companies are including clauses in appointment letters to mitigate losses in such situations. That's why I am seeking expert guidance for my questions and truly want to thank you, members, for helping me.
Regards.
From India, Mumbai
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I am an HR professional, so I just wanted to know more about this area of HR as I have been primarily focused on recruitment. I have asked many of my HR friends about this question, and one of them mentioned that nowadays companies are including clauses in appointment letters to mitigate losses in such situations. That's why I am seeking expert guidance for my questions and truly want to thank you, members, for helping me.
Regards.
From India, Mumbai
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Dear Mr. Dinesh Divekar,
I understand your point, which reflects an ideal world scenario. However, in today's world, it is unlikely that an employee will spend their entire career with one organization, even if the work culture is excellent. When organizations hire freshers and invest time and resources in training them, they typically expect these employees to remain with the company for a minimum period after the training so they can begin contributing effectively. In such cases, offering a retention bonus serves as a motivator.
Thank you.
From India, Kolkata
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I understand your point, which reflects an ideal world scenario. However, in today's world, it is unlikely that an employee will spend their entire career with one organization, even if the work culture is excellent. When organizations hire freshers and invest time and resources in training them, they typically expect these employees to remain with the company for a minimum period after the training so they can begin contributing effectively. In such cases, offering a retention bonus serves as a motivator.
Thank you.
From India, Kolkata
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