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Certain employers have been known to withhold employee pay due to poor performance. This is illegal since workers are obliged to their wages for the work they do and the time they put in. An employee shall be entitled to collect his compensation as long as they reports to work. No-call, no-show policies might be used if an employee fails to show up for work. However, if an employee has granted his written approval, the employer might put the salary on hold. No employer has the legal authority to put any worker’s salary on hold.Â
Sometimes the employees are not able to get new jobs as a result, and may be willing to take a salary drop. Working for less income may be essential as well as preferred to the alternative if funds run out or even unemployment benefits run outÂ
An employer may also withhold an employee’s compensation if they does not execute his or her notice period as required by the contract of employment.
Payments of new hires whose certification is still not complete are another case where the corporation can put employee salaries on hold. This, however, has no bearing on salary processing or amount.
However, there are various reasons for which an employer may hold the salary of the employee.
Some of the common reasons for which an employer holds the salary of an employee are:
An employer may hold the salary of an employee if they are continuously underperforming despite various training and counselling sessions. To motivate the employee to perform well an employer may hold the salary of an employee. However, it can also negatively affect the performance of an employee.
An employer may hold the salary of an employee if the employee is found to be indulged in any misconduct or breaks any organizational rule/ policy. To make him realize his mistake and to ensure that the action will not be repeated in the future an employer may hold the salary as a punishment. The company can also penalize the employee or deduct the penalty from his salary if there is damage to the assets of the organization.
An employer may hold the salary of an employee if the employee is found to be regularly absent from work despite continuous warnings. To reduce employee absenteeism and bring the employee on the proper track, an employer may hold the salary of an employee. The company can also mark the LOP of employees, which ultimately reduces the final payout of an employee.
If an employer is facing any financial difficulties he may hold the salary of an employee as a measure to save money at the time of difficulty. Financial difficulties faced by an employer may include a recession period, low sales volume, unexpected loss during any month etc. This is just a temporary hold and the salary gets released once the situation becomes normal.
An employer may hold the salary of an employee if he is found to be indulged in fraud related to the organization. The salary of an employee is put on hold as a legal requirement and can be released if the employee is found to be innocent. The company can also take legal action against the employee and may ask them to payout for the fraud they had committed.
An employer may hold the salary of an employee if he didn’t serve the proper notice period as per the employment agreement and in some cases he can also take legal action against the employee. Generally the companies have a notice period of 2 months which employees have to complete. Failing to serve the proper notice period mentioned in the employment contract may result in a hold of your salary.
An employer may hold the salary of new employees in case their verification is incomplete despite certain reminders. This does not affect the salary amount and this is a temporary hold and the employer releases the salary once verification gets completed. Generally this is applicable for new employees whose verification is pending despite regular reminders.
Salary on hold refers to the amount of an employee’s salary that an employer puts on hold due to various reasons, including notice period not served, employee absenteeism, bad financial situations etc.
Yes, an employer may put the salary of an employee on hold under various circumstances such as notice period not served, absenteeism, irregular working, fraud committed by an employee.
In some cases if the notice period to be served by the employees is of 2 months, employees can’t suffer without the salary of 2 months so an employer can hold some part of the salary maybe 10-20% of salary and release it at the time of full and final settlement amount.
The full and final settlement consists of clearance of dues towards an employee upon their exit from the company. It includes the salary drawn, leave encashment, reimbursements, variables etc.
According to the old labour laws full and final settlement of employees have to be completed within 45 to 60 days of their last working day and in some cases it goes up to 90 days.
However, the new wage code states that a company must pay the full and final settlement amount to the employees within two days after their last working day.
As per the law, “When an employee has been – (i) removed or dismissed from service; or (ii) retrenched or has resigned from service, or became unemployed due to closure of the establishment, his full and final settlement has to be completed within two days of his last day of resignation or termination.