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Imran Mulani (Manager)     22 December 2009

Illegal Deduction from Salary

Company ABC is deducting 10% of Gross amount of a salary for first 3 months of a financial year as retention money & returning the same after completion of that particular financial year. If any employee resigns, the retention amount will be paid after service of successful completion of the notice period; otherwise it will be forefeited or adjusted against the notice pay as the case may be. Is this deduction legal as per the Payment of Wages Act, 1936? Because as per Section 7(2), there is no provision for such deduction and Section 7(4) of the Act prohibits the employer to do so. At the time of appointment, the company officials verbally tell the joining person about the policy & the same thing is not mentioned in the company policy. Isn't the company culprit as per the Payment of Wages Act, 1936?

Also, as per the appointment letter, the notice period is 30 days. If the company issues a letter to increase the notice period with an increment letter and the employee denies for accepting the same in writting, isn't it a case of partial acceptance as per the Indian Contract Act, 1872? In the appointment letter, it is written that "In all matters concerning your service in the company, you shall, in all respect abide by all present rules & regulations of the organization & future amendments and alterations thereof and additions thereto". Thus, the employee is abide by the rules & regulations of the organizations and not to the alterations in the conditions of service contract.

There is secracy clause also in the appointment letter. If an employee resigns & tells to the existing employees about the fact (retention money deduction) mentioned above, does it mean divulgence of information?

How much time is required for withdrawal of PF after date of resignation?

Please clarify.



Learning

 6 Replies

Anil Agrawal (Retired)     22 December 2009

 Such unilaterial agreements are no more than scrap of paper. What is illegal can't be enforced. Complaint to FICCI/ASSOCHAM/Labour Ministry.

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     23 December 2009

I agree with Anil

Jimmy_JJ (Content Developer)     26 July 2012

Is it leaglly Possible in case a Private Company?

There is a formal announcement that there is no holiday on the occasion of Raksha Bandhan ie 2 August,2012. If any employee wants to take a leave on that festival his/her double salary will be deducted for that particular day.

 

Regards

Badrinath (Sr. Manager - Global HR Compliance)     07 December 2012

No. Law is eforceable equally to all - Private or Public doesn't matter.

The formal announcement regarding Raksha Bandhan is VOID. If you take leave on that day, the company should adjust it to your leave balance and not engage in DOUBLE DEDUCTION.

Kumar Doab (FIN)     08 December 2012

Mr. Badrinath has given valuable advice. Kindly follow it.

Send the copy of the formal announcement by the company to print and Electronic media, trade unions, Wages Inspector, Factory Inspector, Labor Inspector, and Inspector under SE Act, State Labor Commissioner,  Labor Commissioner {Central} , SDM, Human Rights Activists, State Labor Minister, Central Labor Minister, NGO’s and any one else you can think of.

If you do not wish to reveal the identity of the employee send emails { from any id}and make a phone call to Labor Commissioner and point out that there may be a press conference soon and inaction and apathy of Labor Officials may come up.

This should move them.

Tame and shame such employer.  

 

 

The employer seems to have taken an idea from the provision that if an employee is made to work on a holiday double wages, substituted holiday or both have to be paid, and has believed that if employee takes leave on a festival day he shall also deduct double wages.  

You may check if your state govt. has included Raksha Bandhan in the list of holidays?

Whether the employer has sought suggestions from employees, representatives of employees, trade union etc and have notified the Inspector for list of holidays.

{THE KARNATAKA INDUSTRIAL ESTABLISHMENTS (NATIONAL

AND FESTIVAL HOLIDAYS) ACT, 1963

You may read Sec3,3A.

5. Wages.—(1) Notwithstanding any contract to the contrary, every employee

shall be paid wages for each of the holidays allowed to him under

1

[section 3 or 3A]

1

.

1. Substituted by Act 28 of 1997 w.e.f. 30.9.1997

(2) Where an employee works on any holiday allowed under

1

[section 3 or 3A]

1

, he

shall, at his option, be entitled to,—

1. Substituted by Act 28 of 1997 w.e.f. 30.9.1997

(a) twice the wages; or

(b) wages for such day and to avail himself of a substituted holiday with wages

on any other day.

 

And

1

[3. Grant of National and festival Holidays.—(1) Every employee shall be

allowed in each calendar year, a holiday of one whole day on the 26th January, 15th

August, 2nd October and five other holidays each of one whole day for such festivals

as the employer may specify, from out of the list of festivals specified in the Schedule

appended to this Act in consultation with the trade unions or in the absence of any

trade union in consultation with the employees or their authorised representatives in

such manner as may be prescribed:

Provided that except in the case of Industrial establishments owned or controlled

by the Government of India, the number of such other holidays shall be seven

including first day of May and first day of November.

(2) Whenever there is any disagreement between the employer and employees or

the trade Unions concerned as to the festivals to be allowed as holidays during each

calendar year the employer or the employees of the concerned Trade Union shall

refer the dispute to the Inspector, having jurisdiction over the area in which the

Industrial establishment is situated, for his decision and his decision shall be final.}

 

 

The provision of National holidays are there in the State Shops & Commercial Establishment Act & the State Industrial Establishment (National & Festival Holidays and Casual & Sick Leaves) Act.

In accordance with National Holiday Act 1958, Section 3 Every employee shall be allowed in each calendar year a holiday of one whole day on [the 26th January, the first May, the 15th August and the 2nd October] and five other holidays each of one whole day for such festivals as the Inspector may, in consultation with the employer and the employees, specify in respect of any industrial establishment. In accordance with National Holiday Act 1958, Section 5, Notwithstanding any contract to the contrary, every employee shall be paid wages for each of the holidays

NATIONAL AND FESTIVAL HOLIDAYS27

Republic Day (January 26), Independence Day (August 15) and Gandhi Jayanti (October 2) are the three national holidays observed in India. On these days all institutions, irrespective of under which law they are covered, or whether they are public or private organizations or MNCs should necessarily remain closed.

You may look into these enactments as applicable in your state.

e.g. SE Act Delhi:

(13)  “holiday” means a day on which an establishment shall remain closed or on which an employee be given a holiday under the provisions of the Act;

(16)  “leave” means leave as provided for under this Act;E PAYMENT OF WAGES ACT, 1936

COMMENTS

Sub-section 13—”Holiday” : Holidays are off days granted by the employer  to the employees either voluntarily or compulsorily under the force of law.

Sub-section (16)—”Leave”

Sub-section (22)—“religious festival”

3. Rights and privileges under other law,  etc., not affected.—Nothing in this Act shall

affect any rights or privileges which an  employee in any establishment is entitled to at the date

this Act comes into force or under any other law, contract, custom or usage applicable to such

establishment or an award, settlement or agreement binding on the employer and the employee

in such establishment, if such rights or privileges are more favourable to him than those to which he would be entitled under this Act.

18. Wages for the holiday.—No deduction shall be made from the wages of any employee

on account of the close day under section 16 or a holiday granted under section 17 of this Act

22. Leave.

23. Wages during Leave

 

Payment of Wages Act:

What is the provision of the Act regarding deductions from the wages payable to an employed person?: The Act prohibits all kinds of deductions except those which are authorized by or under the Act. {Section 7}

Anil Agrawal (Retired)     08 December 2012

Forget print or electronic media. They believe in sensationalism.


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