The contours of Employee Life Cycle are undergoing swift transformation. Both employers and employees are looking forward to rejigged roles, responsibilities, progression and challenges. The entire ecosystem of the workplace has evolved from the traditional management-employee lens to a consultative and collaborative sphere, where employees are encouraged to be equal-partners contributing to accelerate growth of all stakeholders.
Amidst this ongoing sentiment and endeavour to attract and retain the best talent, what must be kept sight of is that onboarding and separation remain crucial stages of employee transition from one organisation to another. It is significant to ensure that same are done in a compliant way, keeping in mind interests of both employers and employees, as also requirements of law. Notably, Labour Codes lay down few provisions which are understood to have moderate to substantial bearing on how the two processes should be executed.
Industry has developed certain practices relating to onboarding and separation of employees, and has grown accustomed to these over a period of time. This piece attempts to bring to light such few existing trends and examines why it is important for organisations to revisit and evolve them the right way, in light of the mandates of the Labour Codes.
Facets of Employee Onboarding:
Offer letter and Appointment letter:
Companies have evolved different templates of Offer letters and Appointment letters, basis the skillset and roles of the employees being onboarded, as also the sector in which the companies are operating. There is no exhaustive format of appointment letter prescribed by law as of today, except few stipulations mandated to be included in the appointment letter by the Shops and Establishment Acts of some Indian States, viz., Delhi, Karnataka, Telangana, West Bengal and Kerala.
This is set to change after the Labour Codes come into force. The Occupational, Safety, Health and Working Conditions Code, 2020 mandates fifteen pieces of information to be included in the appointment letter to be issued by all establishments covered under the Code. Employers would be given three months’ time to comply with this requirement, once the Code comes into effect. It is necessary that employers take note of this and revisit their existing appointment letters, in line with such requirements, sooner than later.
Further, few employers seem to formulate offer letters far more comprehensively than their existing appointment letter template. In such cases, it would be prudent for employers to substitute such offer letter with an abridged version of offer letter, where most necessary details are projected in precise and minimalistic way, just to enable the candidate to take an informed decision. This would also make sense because the Codes do not mandate any format or information to be stated in an offer letter.
Pay-out of Advances:
It is a general practice amongst employers to make some monetary pay-outs to new hires to attract right talent, including joining bonus and relocation assistance. Generally, employers tie-in such pay-outs to a condition that the employee serves a minimum tenure in the organisation. In case of failure to adhere to such mandate by the employee, companies provide for recovery of such pay out, either in full or on pro-rata basis, at the time of the employee’s separation. Challenges usually surface at the desk of Human Resource team of companies, when such amount to be recovered exceed the quantum of full and final settlement, or what could be recovered from wages of employees.
It is crucial for companies to factor in such contingencies and pre-empt related bottlenecks. A possible solution lies in ensuring that appropriate contractual provisions are incorporated in the appointment letter issued to employees. This needs to be done as part of a carefully considered strategy to deal with such eventualities.
Facets of Employee Separation:
Full and Final Settlement:
At present, companies effect full and final settlement within a time frame ranging from the same day to a few weeks and, in rare cases, few months from the date of separation of the employee. This flexibility currently leveraged by employers is set to cease with the coming into force of the Labour Codes. The Wage Code, 2019 mandates that wages payable to the employee shall be paid to him within two working days of separation of employee, irrespective of the mode of separation. This is crucial to take note, in the sense that it strictly brackets the timeframe for effecting full and final settlement of employees, with non-adherence amounting to non-compliance with the law with consequent ramifications for the Company and its officials.
Consequently, companies would do well to ensure financial liquidity in cases of termination with cause and sudden off-the-guard resignations. As a step to ease out the aforesaid burden, it is necessary that companies revisit their separation and payroll policies, and further devise and incorporate fitting language in said policies, which may help them being in compliance with the Code.
Most organisations have matured in offering complete work from home, as also hybrid models of work, with the objective to afford preferred flexibility to its existing and onboarded employee workforce. In fact, through a recent notification, the Commerce Ministry seeks to allow employees of companies set up in SEZs to work from home for a year at a time. [Read our Insights on this here].
Amidst this, several companies are finding it painful to recover assets from the employees at the time of separation, with repeated chasing of employees often ending up in either filing civil recovery suits or criminal complaints against the employee or writing off the expense as a bad debt.
It is important to take note here that the Wage Code, 2019 permits employers to make authorised deductions from wages of employees to the extent of fifty percent of wages in any wage period. However, recovery of full value of assets by way of authorised deductions from wages might not be legally permissible at all times, except in few cases (For instance, where the asset is given as a true ‘advance’).
Even in cases where it is possible to recover through such mode, it might be too late for HR team to realise that the full value of asset to be recovered from wages far exceeds the value of authorised deductions already made from last wage period of the employee. To add to this, the full and final settlement mandate stipulated in the Labour Codes do not factor in such contingencies and any delay to comply with the same, on the ground of failure of employer to recover assets from the employee, is most likely to be not considered as a mitigating factor for aforesaid non-compliance.
Here again, employers would require to cautiously think through such scenarios and make informed modifications to their asset recovery and separation policies, so as to ensure that the number of agonising cases of failure to recover assets, at least reduces to a minimum.
The changing Labour law regime, with forthcoming implementation of Labour Codes, provides vital opportunity for companies to evolve their existing mechanisms around onboarding and separation of employee workforce. The only way to do this right is to revisit them, through informed decisions. The key here is ensure well curated employment contracts and policies, aligned with requirements of the Labour Codes, which would eventually facilitate employers to sustain a culture of compliance.
1 thought on “Employee Onboarding and Separation: Long-standing Industry trends and why Employers must revisit them”
Wow Sunil, well rounded blog to create awareness of impact of wage codes…