Full & Final Settlement- In Case Of Termination

Dear All,

If a company terminates an employee because of his absence without prior information to the company, then in this case, what would be the procedure for the full and final settlement of this employee? Will the company give him the basic pay as per the notice period mentioned in his appointment letter or not? Is the company bound to do the full and final settlement of this employee or not? What components of salary are counted in F & F?

Please provide me information as per labor laws.

Thanks & Regards,
Shiklha

Hi,

I have been working in a limited company since December 2010. However, since November 2012, the company has been unable to pay salaries on time. I received my salary for November 2013 in the last week of June 2014. I took maternity leave from December 2013 to February 2014, but the company has not paid my salary for those months to date. Upon returning from maternity leave, I took frequent leaves for baby care as there was not enough work. On June 9, 2014, I requested salary advance from HR, but instead of assistance, I was advised to send an email and search for another job due to the company's poor financial condition and the lack of future work opportunities. Subsequently, on June 30, 2014, I was informed that it was my last day at the company. I expressed my desire to discuss the issue with my reporting person, but on July 7, 2014, I was given an ultimatum to either resign or face termination. The company deposited two months' salary within three to four days, but I refused to accept it until my outstanding balance for the past six months was settled. Despite my request, the company has not deposited my provident fund for the last two years or my income tax for this year. What course of action should I take?

Thank you.

Hello Shiklha,

Full and final settlement is to be done when there is termination of service of an employee and subject to the terms of employment in the appointment letter, the employer has to pay full wages or gross salary equivalent to the notice period, which he would have drawn, had he been in the service, have to be paid.

B. Saikumar HR & IR Advisor

No labor Act defined notice pay. They define only wages, and each Act defines wages in a different way, keeping in view the objectives of the Act concerned. Thus, the definition of basic wages under the P.F. Act is different from that under the ESI Act. Therefore, you need to rely on an Act that deals with the rights and obligations of an employee in general. The Payment of Wages Act is one such Act. If the employee in question is covered by the Payment of Wages Act (if his salary is Rs18000/- or below), then he can file an application before the authority u/P.W. Act for the recovery of wages. The question then arises, what constitutes wages under the said Act. Section 2(vi) defines wages as including all remuneration by way of salary, allowances, or otherwise payable for the work done by an employee and includes, among others, any sum which, by reason of the termination of employment of the person employed, is payable under any law, contract, or instrument, etc. In the instant case, the notice pay payable by the employer is the sum payable under the contract and hence forms part of the wages defined above.

Please go through the provisions of the Payment of Wages Act before making a decision and convince yourself first. What the seniors provide here shall not be construed as some legal opinion to be acted upon but only as a reference, guidance, or direction to the member posting a query towards finding an answer to his query/problem.

B. Saikumar

In-House HR & IR Advisor

Dear Mr. Saikumar,

I believe the questioner is inquiring about the full and final settlement of dues, if any, to an employee upon their termination for disciplinary reasons, specifically unauthorized absence.

True, Mr. Umakanthan. But the member did not say that the termination was brought about by way of disciplinary action. The post conveys the impression that the employee stopped coming to the office/work, which compelled the employer to terminate his services in the manner of termination simpliciter. That's why the querying member sought to know what components of salary are to be taken into consideration for paying him notice pay. Since the termination was already brought about by the employer, it is futile to suggest that the employer shall initiate disciplinary action now.

B. Saikumar
In-House HR & IR Advisor

Dear Mr. Saikumar,

Your answer given under the perceptions of the termination to be a discharge simpliciter and resorted to already is correct. However, since the Questioner framed her question in the simple present tense and specifically asked for payment of notice pay on unilateral termination of the contract of employment for the unauthorized absence of the employee, I have a doubt whether the management is planning to terminate him under the garb of discharge simpliciter to avoid the lengthy disciplinary process.

Mr. Umakantan, thank you for raising the issue. I reread the post, and yes, as you mentioned, the member who posted the query framed the question in the simple present tense. In that scenario, if the employee is a workman, it is open to him to question the termination on the grounds of it being punitive in the appropriate forum (conciliation and subsequently in the labor court), and it is for the employer to prove the bona fides of his action. If the employee is a non-workman, he has a civil remedy which he is unlikely to pursue as in the majority of cases. Thus, it is prudent for the employer to conduct a disciplinary process for unauthorized absence and impose an appropriate penalty. A penalty of dismissal may not be suitable in every case of unauthorized absence; therefore, your apprehensions may also be valid.

The members leave many gaps in the information, leaving it open for the responding members to fill in those gaps by stretching their knowledge and experience. In this instance, I confined myself to the limited question asked by the member regarding what components of salary/wages shall count for notice pay without entering the domain of decision-making of the employer in respect of the termination since the reply was not sought on termination. I have answered the limited question with reference to the Payment of Wages Act as the member sought to know the reply within the framework of labor laws. Is it okay? If there is another dimension to this limited query that I missed, please enlighten me for my knowledge's sake and that of the members.

B. Saikumar

HR & IR Advisor

Your answer to that part of the question relating to notice pay in the event of full and final settlement is highly commendable as it logically connects the matter to the intricate point of the provisions of Sec. 2(vi) of the Payment of Wages Act, 1936, in addition to the terms of unilateral termination of the contract of employment by the employer. I have nothing to add other than placing my heartiest appreciation to you on record for the beautiful interpretation based on perfect cross-reference.

Hi,

If any company terminates an employee on grounds of discipline (code of conduct), can we hold his full and final settlements like salary and other payments along with his relieving letter and issue a termination letter? Will there be any legal issues against this? Please advise as per labor laws.

Dear Sandy,

Under the Shops and Establishments Acts, it is generally provided that an experience certificate has to be issued, whether the employee is to be dispensed with simpliciter or due to misconduct. Additionally, the full and final settlement of dues must be completed at the time of discharge. It is the duty of the inspector to ensure compliance with these regulations. Similarly, under the Payment of Wages Act, employees earning less than Rs. 18,000 can recover wages under the Act.

Can anyone help me to know how to create ESIC report through Saral Pay Pack software? Also, please mention the complete process of ESIC payment.

Dear PSHINGARE,

If you come under the definition of a workman under section 2(S) of the Industrial Dispute Central Act 1947, for example, unskilled, skilled, technical, clerical, and supervisory work occasionally, then do not submit any resignation letter. Let the employer terminate the employment, and then you will have full rights to lodge a case in the labor court of your region to get the service with full back wages. Otherwise, resign from service.

Regarding maternity benefits, file an application before the labor officer of the concerned area in your region. You will get leave with salary along with all medical expenses incurred from the pregnancy period to the delivery period. You can also file an application before the Assistant Labor Commissioner of your region to receive all salary.

Manoj

Mr. Sandy,

You can't terminate the service of any employee without a domestic enquiry and punishment by legal grounds. For example, when an employee commits misconduct such as disobeying superiors' suggestions, being involved in incidents, or being convicted by a court order. The first two instances require a domestic enquiry by a police officer. If possible, the police officer will file an FIR. In such cases, you can suspend the employee's service by paying them 50% of their wages for up to 6 months. After six months, the payment should be reduced to 1/3 of their full wages. In the third scenario, no enquiry is required.

Moreover, you can't withhold the full and final settlement, including salary, except for gratuity under the law. The full and final settlement should be paid within 15 days of the completion of termination from service. Failure to do so may result in the employer not being able to terminate the employee's service. If it is proven in court that the employer engaged in bad practices, the employer may be penalized by having to reinstate the employee's service with full back wages.

Hello Sir,

I am MD. Razi, a Medical Coder at Champ Info Software in Noida for the past year. I am currently under a one-sided bond for 5 months. If I choose to leave the company, I will be required to pay 5 months' worth of salary. However, if the company terminates our employment without any compensation or notice period, we would like to seek your advice on whether we can take any legal action.

Please advise.

You raise a dispute before the area Conciliation Officer (probably ACL or Labour Officer) under Section 2A of the Industrial Disputes Act, 1947 for reinstatement and back wages.