Can companies really deduct salaries if employees report late to work?

Industry experts say it is a common trend for all organisations to have a comprehensive set of terms and conditions that may also be in the form of bylaws that include timings of the organisation that must be adhered to by all employees.

In the ordinary course, non-adherence to these bylaws, including office timings, may attract consequences, Suvigya Awasthy, associate partner, PSL Advocates & Solicitors, said.

Further, the Central Rules framed under the Industrial Employment (Standing Orders) Act, 1946 (applicable to workmen category) also permits deduction from wages if a worker comes late for work, Suyash Srivastava, Partner, DSK Legal, said.

“In fact, habitual late attendance is treated as a misconduct wherein a prescribed fine may be imposed, after following the due process of law,” he added.

However, such consequences cannot be adverse and certainly cannot be taken unilaterally by organisation without giving sufficient notice to the defaulting employee.

“From the legal standpoint, there must be a well-defined and prescribed procedure in the bylaws that may subject the defaulting employee to disciplinary action first and deduction of salary thereafter if the employee continues to violate the bylaws of the organisation,” Awasthy added.

As far as the Code on Wages, 2019, is concerned, which applies to people employed on wages, Awasthy said there is an express stipulation of the nature and type of deductions that can be made by the employer that are only permissible under the code itself and not otherwise.

“This prevents the employer from making arbitrary and whimsical deductions from the wages of the employees,” he said.

How much can be deducted?

An employer can deduct the salary of an employee for being late subject to the deduction being proportionate to the lateness of the employee, said Aditya Chopra, managing partner, Victoriam Legalis, a Mumbai-based law firm.

For example, if the employee is an hour late, the salary can be deducted only after computing the salary due to the employee for that hour only.

“In no case shall such deduction be made for a greater period than which the employee is absent from duty,” Chopra explained.

Most companies follow the practice of deducting half-day salary when an employee has reported two or more two hours late, he observed. “However, this practice is not substantiated by law.”

What is the trend in India Inc?

HR leaders say such practices are no longer prevalent in large and established organisations.  In the light of the recent emphasis on work-life balance, Anjali Raghuvanshi, chief people officer of staffing firm Randstad India, believes salary deductions in this context are not an option that organisations should even consider.

Randstad said some organisations have now moved to flexible working where an employee can complete the required number of work hours any time in a day. In some cases, organisations have redefined the concept of productivity wherein clocking in a specific number of hours per day is no longer a mandate.

However, Satish Shukla, co-founder and chief HR officer of robotics company Addverb Technologies, said even though what work and career mean to people has evolved, company policies have not.

“Even in large conglomerates that follow best practices, reporting to the office on time is a must,” he said.

Recent trends highlight what today’s talent demands. More than half (54 percent) of employees from around the world would consider leaving their job if they are not afforded some form of flexibility in where and when they work, according to the EY 2021 Work Reimagined Employee Survey.

“Instead, they have explored the idea of adopting task-specific work days, where an employee completes certain tasks every day irrespective of the hours worked,” Raghuvanshi concluded.