Understanding Notice Period Buyout and Repayment Policy in Resignation Scenarios

My friend resigned from a company "A". When he had joined the company "A", he had received the amount of notice period which he had paid to his previous company. Now that he has resigned from the Company "A", he is being asked to pay back the amount that was paid to him earlier, saying that it is the policy of the company that if someone leaves the company within 1 year, he has to pay back the amount of notice period that was paid to him on leaving the previous company. Though he has resigned within 1 year, he was not told about this policy at the time of joining or payment of the said amount to him. Also, there was no document signed by him or email that acknowledges that he was told about the policy. Can the company recover the same from his F&F?

Hi Naresh,

Yes, the company can deduct the amount from F&F, but if no document has been signed, it can be challenged. Most companies have this policy or clause mentioned in either the appointment letter or policy manual.

Regards,

Hello nareshvd,

Archna is right. And even if no document is signed, don't you think your friend [or is it 'you'?] there's a moral obligation to pay back when the Company A went the extra distance to pay the Notice Amount to the earlier company? Especially since he is leaving within a year. Any time of service of less than a year, in most industries, is considered too short for payback to the organization.

Even if nothing is mentioned in the Appointment Letter, if this is challenged, the company can always bring out some document to prove that this is a standard practice. However, this doesn't mean your friend has to back out due to this possibility. Just ask him to go by his conscience—that's what will carry the day for him. If he wants to go the legal/rules way, ask him to be ready for the Company A also to go the legal/rules way. One can't quote the rule book & expect the other party to adhere to just the moral values.

Rgds, TS

Dear My Friend,

Please clarify the following points:
- Is there a COMPANY HR POLICY SIGNED?
- Were you part of an Induction program in the company?

If the answer is yes to these questions, then you may have to pay back the notice pay amount. Otherwise, it can be challenged.

Mangesh Wakodkar
Sr. Executive HRD

Assuming:

1. that your friend had to pay Company A a salary in lieu of the prescribed Notice Period he was obliged to give as per the terms of his employment,
2. this amount was reimbursed by Company B, perhaps since they wanted him on board at the earliest, and
3. that there is no document that your friend signed in this regard,

Then, recovering this amount from your friend will not be proper. One must appreciate that (as per my assumption) Company A wanted him on board ASAP. Therefore, your friend left the Company he was working for after surrendering Salary in lieu of the prescribed Notice Period and joined Company A, which reimbursed the surrendered money to your friend. Therefore, your friend is not obliged to refund this money to Company A. If it is a matter of Company Policy, then it should have been explained to him by the HR of Company A before reimbursing the money to your friend.

Cheers!!!
Vasant Nair