Resignation and notice period buyout
usha
(Querist) 28 August 2014
This query is : Resolved
Hi Everyone,
I am working for a indian IT company. But currently I am in US with my spouse and kid on 3 months Leave without pay. Due to some personal reasons I had to resign my job because HR is not ready to extend my LOA for few more months. Because I am not in a position to leave US i.e. going back to INDIA to serve the notice period of 3 months, I opted to buy out my notice period. To make a buy out my employer is asking me to pay 3 months gross salary which is coming around 2.5 lakhs which is very high amount. It includes Basic pay (~35000)+HRA(17350)+ Special Allowance(26000)/month.
My employer is not having policies clearly defined. No policy document is clearly saying about the buying out notice period. Also when my employer's HR team prepared FnF Statement. If I ask why do I need to pay 3 months gross pay, they are asking me to refer the point from my offer letter. And no where it is specified as Gross salary. As per industry standard most of the companies asking to pay the basic salary to buy out the notice period.
In my offer letter point under Notice period says 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 from the Company you shall provide the Company with a prior written notice of similar period of such resignation or payment in lieu thereof. However, in case any disciplinary proceedings are either contemplated or pending against you, the Company shall have the right not to accept your resignation. If you desire to resign from your services hereunder, you shall, not withstanding the provision with respect to payment in lieu of the notice as provided hereunder, make yourself available during all office hours, for such period from the date of tendering your resignation, as may be required by the company as its discretion order to ensure smooth transition.""
Please note that it says "payment in lieu thereof". Just payment. What does it really mean? No point says that payment is Gross. Just a payment.
Please advice how I can take it forward. I am able to pay money for buying out my notice period. But not the gross salary, because for the past 3 months I am on Leave without pay.
Expecting your responses.
Kumar Doab
(Expert) 28 August 2014
It is felt that similar query has been discussed in the past too.
Notice period/pay is part of service conditions and is governed by various enactments applicable to the establishment.
IT/ITeS companies are covered by:
---Standing orders. If standing orders are not certified model standing orders shall apply. These being instrument of law/statue shall prevail upon any private agreement that employer has drafted and signed with employee e.g. appointment letter/contract of employment………………………..
The employer is duty bound to display standing orders (certified/Model) at a conspicuous place in establishment and also employee can obtain certified copy of standing orders (certified/Model)against a nominal payment say Rs10/-.
You may go thru: Model Standing Orders: Sec13-18: Notice period during probation period is NIL and after confirmation is 30 days.
Therefore if your designation is covered by certified standing orders (CSO)or if you are covered as ‘Workman’ as in ID Act the notice period applicable to you is 30 days only. Any service condition that is inconsistent with standing orders shall not survive.
The notice pay =30 days wages.
---(name of the state) Shops and Commercial Establishments Act; that was enacted to govern the service conditions of employees covered by this enactment.
Notice period/pay is well stated in it as per length of the service.
e.g Delhi Shops and Commercial Establishments Act 30;(2) In case he fails to give one month’s notice he will be released from his employment on payment of an amount equal to one month’s pay.
Daily average wages can be arrived at:; Monthly wages/26
30 days wages= Monthly wages/26*30
If you are covered by def. of ‘Employee’ as in this Act the clauses and sections shall be applicable in your case.
The employer and its attorneys in HR/Line Management shall scream that you are not covered as ‘Workman’ and ‘Employee’ however designation alone does not decide it.
Your able Labor Consultant/service lawyer/law firm can help you to establish that you are covered.
Usually employer tenders OT @ Basic+DA……………………and also leave encashment @ Basic+DA, and PF, Gratuity @ Basic+DA, ………………….
Thus if employer tenders OT, leave encashment @ Basic+DA it should apply notice pay at this rate too.
Resignation can be without permission and notice. If notice pay in lieu of notice period can be opted by employer it can be opted by employee too.
Does employer (your employer) seeks permission of employer to tender notice pay in lieu of notice period in case of termination? Does it tender notice pay @ gross/CTC if it initiates termination?
If NO why should employee agree to serve notice period with employer (your employer) and tender notice pay @ gross/CTC?
The contract of employment should promote equitable discretion for both employer and employee or it can easily be termed arbitrary.
If the employer feels that it may suffer some financial or other loss due to abrupt termination and if employee is unwilling to indemnify the employer it may stress upon the employee to serve the notice period.
Employee should always tender some reasonable notice and help to complete the exit process/handover of charge.
In your case you were on approved LOA/LWP…………………….implying that you had not left any assignment/tasks pending and per internal leave/policy before proceeding on leave employee might be expected to handover the tasks/charge to another replacement employee/line manager/HOD. YOU should take a stand that nothing was pending at your end.
This should enable you to handle other portion of extract of appointment letter posted by you.
If you are not covered by any of the enactments mentioned above then service conditions may be governed by T&C as in appointment letter and more importantly HR policy/Service rules and regulations mentioned in appointment letter………………………………..hence you should refer to these also.
Before you claim benefit of doubt download all docs and get these examined by your able lawyer.
Till then you may refrain from posting in writing on your own.
Rajendra K Goyal
(Expert) 28 August 2014
Well and in detail advised / guided by the expert, agree to it.
usha
(Querist) 29 August 2014
Thanks kumar doab and rajendra k goyal. I have gone through my terms of employment and few company policies. In that they didn't mentioned as the buyout amount would be gross or basic. So is it okay to talk with hr about this once?if they are not ready to accept the basic pay then we can go ahead and proceed legally? Please clarify me. now a days this company started to do this kind of threatening to most of the employees. Thanks all.
Kumar Doab
(Expert) 29 August 2014
1. The notice period may not be more than 30 days in your case, as explained.
2. What is wrong if company has initiated to apply notice pay @ gross salary, now? The question arises has it been tendering notice pay @ gross pay in the past or not and also has it started tendering notice pay @ gross pay now or not, in case it has initiated the termination? For the rate of notice pay negotiate carefully since the rate is well defined in enactments applicable to the establishment, as explained. The enactments
are applicable to establishment and employee as well.
3. You should be able to catch the opposite party on wrong foot, as explained.
4. You may proceed as discussed and obtain the opinion of your lawyer or we Hope that you have a strategy to counter the company.
