LIVE Online Course on NDPS by Riva Pocha and Adv. Taraq Sayed. Starting from 24th May. Register Now!!
LAW Courses

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Employee123 (.)     30 May 2012

Not paying variable component to employees in notice period

Employer in this case is an IT services company which offers CTC (cost to company) to its employees as follows:

1. Basic salary

2. Flexible Benefit Plan

3. Company Incentive Policy (CIP)

4. PF, Gratuity,Insurance Premium etc

 

Payout of Point 3 is where I believe the company policy is unethical and illegal. CIP for period Oct-Mar is paid out in May and employees who have resigned after Mar and are serving 2 month notice period in May are not paid although were regular employees in the period of Oct-Mar. 

This amounts to taking away a part of employee's salary in case he resigns from the company although he worked for the  period of 6 months for which the payout is being done. CIP is not defined as a "bonus" in the compensation letter but as a "incentive" payout based on performance of individual and company. 

 

Law experts please help in understanding if this can be taken up in court of law/agencies and what is the best way forward for affected employees.



Learning

 11 Replies

Kumar Doab (FIN)     30 May 2012

The terms and conditions of CIP as expressed in CIP policy, certified standing orders of the company, employee rule book, appointment letter needs to be looked into. Usually it is expressed that incentive shall be paid to employees who are in service at the time of payout. Employee should endeavor to resolve the matter by applying rapport, goodwill, and exceptional levels of persuasion, persistence, negotiation, reasoning skills with line management, HR and if required must approach good offices of appointing authority, MD,CEO, Company Secretary with a copy to Head-HR. Employee should transact in writing under acknowledgment. You have posted that” CIP is not defined as a "bonus" in the compensation letter but as a "incentive" payout based on performance of individual and company. “ CIP is not bonus i.e. it is not part of statutory bonus. It is linked to performance of individual and company, thus it is incentive and another term for variable pay. It is compensation linked to individual, probably team also in your company, and is additional payout for delivering more than normal or satisfactory performance. HR version of bonus might be that it is paid to encourage the employee to perform better in next year. If employee leaves after getting payment of incentive it is not much return on investment, and departure of employee affects the future performance of the company and the replacement shall take time to become operative and performing to contribute. During the brain storming session, policy formulation process, the stakeholders in the policy might have interpreted the same for CIP. The control on payroll costs must be basis of written and unwritten rules including those pertaining to CIP. IT business is becoming increasingly competitive and employers are aggressive to derive maximum from their employees. Alarmed by the slowdown companies are aggressively cutting on variable pay components which may be another name for CIP. However some written and unwritten policies are specific to control pay roll costs/ payouts, and save buy unethical practices. This policy might not have been circulated to employees. Whereas all the terms and conditions, criteria, related to CIP should have been clearly defined and expressed in CIP sheet/circular/CTC sheet/appointment letter etc. --Incentive is for past performance and not for future expectation. It is felt that no goals have been negotiated and firmed up and tagged for next period. Incentives are part of the retention policy of the company. Hence HR in company tries to deny incentive to departing employee. --Highlight your dedication and regularity during the period. Emphasize on your contribution to the team and company. --If it is included in salary CTC it should be paid. You must shout that you have not rested on the comfort of the regular/fixed salary but strived to earn by contributing to the team and company (mention details). You are eligible and you should be paid. --You have worked during the entire period of CIP and achieved the objectives set in CIP, and thus company has accrued benefits from your efforts during the current period and possibly shall reap future benefits too. Hence it should be paid to you. Highlight the revenue generated by you, current benefit accrued by company, and future Benefits Company shall accrue from your efforts. --CIP is not linked to length of service. It is for performance in specific period and you have been in employment during this period and have performed. You are not asking for prorate reward. --Some employees during this period must have performed below you and might have got the payout. You may touch this also. --Notice period is counted in regular service. Another factor which influences the thought process of the employer is that majority of the employees do not agitate and they may fume for some time and they can be influenced by pressing hot buttons like: relieving letter, reference check. A smart employee shall resolve the matter in his favor by applying skills and drilling sense into the company and without any adverse affect.
1 Like

Kumar Doab (FIN)     30 May 2012

 

Law on Negative Covenanats in Employment Contract

·  Are  Increments  automatic  or  linked  to  performance?  Incentives

and Performance linked payments:  Stoppage  of  increment  is  considered  a

punishment  and  unless  the  appointment  letter  is  clear  that  increments  are  not

automatic  and  will  be  dependent  on  performance,  non-payment  of  the

wages/components  can  be  contested.  In  some  companies,  parts  of  the  monies  are

realisable  only  on  accomplishment  of  performance  targets.  These  Incentive

Schemes are poorly drafted, and leave a lot of scope for dispute, and particularly at

the  time  of  resignation,  they  create  a  lot  of  problems  for  the  company.  Employees

also  claim  incentive  payments  for  the  period  they  have  worked  and  these  claims

have  merit  as  the  pay  structure  has  been  worked  out  in  such  a  manner  that  it  is

performance  linked.  Individuals  who  have  performed  and  achieved  targets,  for

which  some  payments  are  due,  claim  the  payment  as  per  the  company

announcements.

However,  just because  the employee has quit the employment,  the company denies

the  payment  and  puts  the  individual  through  hardships.  These  payments  can  be

realised with costs, but the company hopes that the individual will not file a case in

court  and  incur  additional  expenses  to  claim  some  benefits.  One  person  filing  a

claim emboldens others.

Incentive Bonus is not part of Wages


Attached File : 627293942 incentive bonus not part of wages kirloskar brothers ltd. vs appellate authority under ... on 8 may, 2003.pdf, 627293942 law on negative covenants in employement contract.doc downloaded: 957 times

Employee123 (.)     30 May 2012

 

Thanks Kumar for detailed inputs. While I agree with all the reasoning that one can take this up with employer at highest levels, the problem is that employer has framed this policy and it will not make much sense to argue sense with them in the matter. As you said, employers rely on tendency of employees to not take such matters to court.

Do you think that this matter can be taken to a court of law? If yes, please help by telling me the procedures involved.

Employee123 (.)     30 May 2012

Thanks Kumar for detailed inputs. While I agree with all the reasoning that one can take this up with employer at highest levels, the problem is that employer has framed this policy and it will not make much sense to argue sense with them in the matter. As you said, employers rely on tendency of employees to not take such matters to court.

Do you think that this matter can be taken to a court of law? If yes, please help by telling me the procedures involved.

Kumar Doab (FIN)     31 May 2012

It is felt that you should not jump to litigation until or unless you have exhausted all options and employer has issued declinature in writing. You must submit carefully structured representations addressed to good offices in writing under acknowledgment, covering everything, and build favorable record.

You may show the copy of this policy, written communication vide which employer has stated CIP shall not be paid to  employees who have served notice of resignation, appointment letter, certified standing orders of the company, HR manual/employee hand book, etc to a competent and experienced service lawyer. You can also post these in this thread. You may erase the names etc to maintain the confidentiality. Your lawyer can source judgments and precedence favoring employee. There might be other judgments and precedence than attachments posted in this thread.

It is believed that you have record and documents of performance e.g. Tgt. Vs Achievement with you.

It is felt that it is difficult for a company to state in writing that an employee who is notice of termination (initiated by employee or employer) shall not be paid incentive for which he/she had qualified by satisfying all other terms and conditions.

It has been seen many of the employees succeed in getting payment of incentives by applying rapport, goodwill, and exceptional levels of persuasion, persistence, negotiation, reasoning skills with line management, HR and good offices of appointing authority, MD,CEO, Company Secretary. These offices do evaluate the probability of landing in dispute and merits on their side and chances of succeeding in case of litigation. The good offices do grant waiver of written and unwritten rules.

CIP is usually for employees in senior management cadre. A competent and experienced service lawyer after evaluating the designation nature of duties can suggest the appropriate forum to you e.g. O/o Labor Commissioner, Civil Court. The decision is on merits. Your lawyer shall be in a position to give you the assessment of merits.

IT companies were granted exemption from Industrial Employment Standing Orders Act for 2 years is some states. These companies have sought extension. You may check the status for your state.

Valauable advice of learneed experts/members is sought.

 


Attached File : 841083189 exemption from standing orders.doc downloaded: 249 times

Employee123 (.)     01 June 2012

Thanks Kumar. I will surely go ahead and take up this matter officially with the  company HR. Meanwhile, I will post some more information so that you/others can suggest me the right way ahead:

1. Meeting performance objectives: As per annual performance review for year 2011-12, exceeded expectations on all fronts and got best possible performance rating. So, performance can not be cited as a reason to not give me CIP.

2. Compensation revision letter: My compensation revision letter for FY 2011-12, states following about CIP,

 "Incentive is payable only to those employees who are in active service on last working day of period i.e. Sept 30 for first half and March 31 for second half"

Based on this statement, I am eligible to recieve my CIP for period Oct 2011 to Mar 2012 since I resigned in April 2012.

 

3. Official CIP policy document says following:

"Under following scenarios (including but not limited to ), employees will not be eligible for CIP payout:

1. Employees serving notice period. "

.... some other points which are not relevant here.

This policy does not state if the decision to render employee ineligible will be based on his employment status on 31-March (end of CIP period) or 31-May (payout date)

 

4. FAQ document on same policy described in point 3 says:

"If employee has worked for entire half year but serving notice period on date of payout, he will NOT be eligible for CIP payout"

This point in FAQ contradicts the compensation letter and also is cause of all trouble.

 

Based on data above, I  request you  to please further guide me.

Kumar Doab (FIN)     01 June 2012

Companies do claim that interpretation of the management shall be final and binding. You may check your documents and company might have stated this.

However you should impress upon "My compensation revision letter for FY 2011-12" as mentioned in point number 2 by you. Competent employee of the company must have signed on this letter, and might have kept a column for affixing signatures by employee towards acceptance by employee. Company might have taken your acceptance on copy of this letter.

It is felt that this letter should score over any interpretation as it might have become part of your contract as CIP is expressed in your appointment letter and CTC sheet attached with appointment letter. You must have affixed your signature towards acceptance on both appointment letter and CTC sheet. Company might have expressed in appointment letter that your remuneration shall be as per annexure……i.e.  CTC

You have posted that ""Incentive is payable only to those employees who are in active service". Company may interpret that notice period is not active service. This is another point where you should establish, that you remained on the same projects, performed same role, and continued to receive instructions, guidelines, orders, to perform on the same projects which were assigned to you before submission of your notice. You must copy all relevant record. Another option to copy record is that you can submit letter addressed to good offices and enclose copies of relevant record in list of enclosures and retain a copy.

You must give a beating on the points that :

-you are not asking a prorated incentive as you have worked for the full period of CIP.

-you have contributed during this period and have infact outperformed the standards set by the company/your contribution is higher than other employees, and with your performance company shall reap future benefits…………mention details. You may mention that with your contribution up to march, company has gained benefits in April, and so on. You may mention your performance as cited at point no. 1 by you, in bullet points.

The notice period is counted in service period.

Does your company have a policy that employee on notice period may not attend office or shall not be assigned any project/assignment, and shall be immediately withdrawn from tasks on hand, and role shall not be active? You may also touch upon the facts that your performance and contribution was better in the notice period.

Was your attendance in the office passive?

What is the date on Compensation revision letter/Official CIP policy document/FAQ document? Which one of these is latest?

It is felt that you should submit letters under acknowledgment addressed to good offices and urge to take compassionate view. Good offices can provide relief, irrespective of whatever be the interpretation.

It shall be appropriate to show all records to a competent and experienced service lawyer. Your lawyer may have precedence as applicable to your case, and may have handled cases of your trade.

Related lawyers list is given on the bottom of this page. You can conduct lawyer search also.

Valuable advice of learned experts/members is sought.

 

 

  Related 'Labour & Service Law' Lawyers

Kumar Doab (FIN)     05 June 2012

---Law on Negative Covenanats in Employment Contract

·  Are  Increments  automatic  or  linked  to  performance?  Incentives

and Performance linked payments:

Employees also  claim  incentive  payments  for  the  period  they  have  worked  and  these  claims

have  merit  as  the  pay  structure  has  been  worked  out  in  such  a  manner  that  it  is

performance  linked.

The judgment 'Incentive Bonus is not part of Wages" may not be the only judgement.There can be many other judgement similar to your case. Your claim is for incentive alone and you have worked for the entire period.

"These  payments  can  be realized with costs, but the company hopes that the individual will not file a case in court  and  incur  additional  expenses  to  claim  some  benefits.  One person  filing  a claim emboldens others."

---"Was your attendance in the office passive? What is the date on Compensation revision letter/Official CIP policy document/FAQ document? Which one of these is latest?"

Kindly post the resolution and developments in this thread. This shall help many of fellow citizens and colleagues who may be facing similar situation.

 

Employee123 (.)     02 December 2012

Hi Kumar

 

Its been several months since we discussed this matter, but I have now quit the company and relocated to another city. I had made a representation to CEO, CFO and HR-head of the company as per your guidance but HR-head replied that they will not give me CIP as per company policy.

I want to go to court against this policy, so can you guide on how to proceed?

I may not have time & energy to go to courts for this case so which is right court where this can be followed and what are relevant sections of law under which this case can be filed?

Or do you think this case merits to be taken up in a court of law?

 

Regards

Kumar Doab (FIN)     02 December 2012

It was pointed out that “IT companies were granted exemption from Industrial Employment Standing Orders Act for 2 years is some states. These companies have sought extension. You may check the status for your state.”

You may go thru another publication mentioning state of Karnataka has ended blanket exemption granted to IT companies from the IESO Act.

There are threads in LCI mentioning IT companies have started quoting standing orders to its employees. There are some threads initiated by IT sector employees mentioning IT companies had included gratuity in CTC and denied disbursement to employees who separated before 5 years but later agreed to pay.

It could be possible as companies tried to subject employees to long drill of deliberations anticipating that employee shall get subdued at some step and shall quit his efforts feeling that he won’t succeed and shall not resort to obtaining legal advice and later litigation. The one inference which can be drawn is that the employees who persist may succeed.

However it is up to you to persist further, obtain legal advice of your local lawyer, agitate or give up. Since you have performed you should try.

 

The companies which have not framed its certified standing orders shall have to adhere to model standing orders.

It is believed that you have signed your acceptance of FNF statement, and you have received relieving letter.

IT employees had started a community for many of their issues and you may find like minded employees facing similar situation in your company and may be able to help you.

IT/BPO Voice of India | Facebook


UNITES Professionals is said to be the top union for IT employees.

If the company has replied in writing thru its good offices that it shall not pay as per its internal policy you have a reason and logic as it has closed all doors on you, despite the fact that you have done your level best to persue for an amicable settlement, thru dialogue and arbiteration.

In a given situation employee can approach trade union, and/or invoke the provisions of ID Act, IESO Act, Payment of Wages Act, SE Act as per explanation of employee under the provisions of these enactments or approach civil court. Designation alone does not decide that employee is a workman or not.

It shall be appropriate to approach a competent and experienced service lawyer/labor consultant with copies of all of your documents and give inputs in person and proceed under expert advice of your lawyer. Do not conceal anything from your lawyer. Your lawyer shall evaluate the merits and may opine that you fall within the category of workman. Your lawyer may opine that the subject matter has limitation period of three years.Your lawyer may have some judgements to support your cause.

Company may yield to legal notice of your lawyer or you may have to agitate in the appropriate forum. Company may yield to your demands during conciliation proceedings in o/o ALC or the ALC shall issue reference to Labor Court.

Valuable advice of learned experts/members is sought.

 


Attached File : 371416900 karntaka now applicability%20of%20standing%20order%20to%20it%20industries.doc, 371416900 model%20standing%20orders.doc downloaded: 125 times

saikat   15 February 2018

Does a company have legal right to define any policy they wish to at its discretion and unilaterally. no other contract between two entities will have such an unequal relationship. 


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Start a New Discussion Unreplied Threads



Popular Discussion


view more »




Post a Suggestion for LCI Team
Post a Legal Query