If you are stuck in such a situation, here is what to do.

A situation recently came to light involving Mr. Alok Sharma, an employee at a prominent financial services company, ‘Alpha Secure Solutions’. Mr. Sharma had been with the company for over two and a half years. He tendered his resignation on July 1st, 2025, with a standard 90-day notice period, making his last day September 29th, 2025.

Mr. Sharma requested an early release for August 31st, 2025. The company agreed, on the condition that he pay one month’s salary in lieu of the shortened notice period, a term Mr. Sharma accepted. However, the company imposed two additional, contentious deductions from his final settlement.

First, the company demanded the return of a ₹45,000 relocation bonus. This bonus was given to Mr. Sharma in June 2025 when the company mandated his transfer from Jaipur to Pune. The company’s justification was that he was leaving shortly after the relocation. The key issue here is that the relocation was not voluntary but a directive from the management.

Second, a confirmation bonus of ₹55,000, which was paid to him on October 15th, 2023, after his probation, was also clawed back. The employment agreement had a clause stating that this bonus must be returned if he resigned within two years of its payment date. Without any prior notification, the company deducted this entire amount from his July 2025 salary. By his proposed early release date of August 31st, he would have served nearly 2 years and 1 month since the bonus was paid, and by his original last day, the period would be even longer. This raises questions about the legality of the clause itself and the unilateral deduction from his salary.

Advice in such cases

Navigating disputes with an employer over financial settlements can be complex. Here is some general advice:

• Review Your Employment Contract: Carefully examine the appointment letter, company policies, and any agreements you signed. Pay close attention to clauses related to notice periods, bonuses, and clawbacks.
• Maintain Written Communication: Keep all communication with your employer, especially HR and finance departments, in writing. Emails serve as a crucial record of discussions and agreements.
• Do Not Agree Under Duress: Do not verbally or in writing agree to deductions that you believe are unfair or illegal. Politely state your disagreement and the reasons for it.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

Several Indian laws govern such employment disputes. The primary statutes include:

• The Indian Contract Act, 1872: This Act determines the validity of the employment contract’s terms. Section 23 deems agreements with unlawful objects or considerations as void. Unconscionable or one-sided clauses that impose an undue penalty can be challenged in court.
• The Payment of Wages Act, 1936 / The Code on Wages, 2019: These laws strictly regulate deductions from an employee’s salary. They specify the permissible deductions, and any deduction made outside this scope without the employee’s consent or a court order is illegal. A unilateral deduction of a bonus amount is a clear violation.
• The Industrial Disputes Act, 1947: If the employee qualifies as a ‘workman’ under this Act, they have access to specific grievance redressal mechanisms through the Labour Commissioner and Labour Courts.
• Specific Relief Act, 1963: This act can be relevant as courts generally do not enforce contracts for personal service, meaning an employer cannot force an employee to work. They can only claim reasonable damages, not arbitrary penalties.

If you are the complainant

If you are the employee in such a situation and wish to take action, here are the steps to follow:

• Gather All Documentation: Collect your appointment letter, salary slips (especially the one showing the deduction), bank statements, bonus payment confirmation, all email correspondence regarding resignation, relocation, and the dispute.
• Send a Legal Notice: Through a lawyer, send a formal legal notice to the company. The notice should detail the facts, state the illegality of their actions (unauthorized deduction, unfair clawback), and demand the reversal of the deduction and payment of all dues.
• File a Complaint: If the company does not comply with the legal notice, you can file a complaint with the office of the Labour Commissioner for recovery of unpaid wages. Alternatively, you can file a civil suit for recovery of money in the appropriate court.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If you find yourself in this predicament, here are the immediate steps you should take:

• Object in Writing: The moment you notice an unauthorized deduction, send a formal email to your HR department, finance department, and reporting manager. Clearly state that the deduction was made without your consent and that you object to it.
• State Your Position Clearly: In your communication, explain why you believe the clawback of the relocation bonus (due to a mandatory transfer) and the confirmation bonus (disputing the clause’s applicability and fairness) is unjustified.
• Calculate Your Dues: Prepare your own full and final settlement calculation, including salary, leave encashment, and other benefits, and present it to the company to show the amount you are rightfully owed.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

It is important to understand that such disputes are civil in nature. The police have no jurisdiction over contractual or employment-related financial disputes. If you approach a police station, they will not register an FIR (First Information Report) as it does not constitute a criminal offense under the Bharatiya Nyaya Sanhita (BNS). They will rightly advise you to seek remedy through the Labour Court or a civil court. Police involvement would only be warranted if there were elements of criminal intimidation, cheating, or forgery, which is not the case in a standard bonus clawback dispute.

FAQs people normally have

• Can a company enforce any clause just because it’s in the contract? No. Indian courts can and do strike down contractual clauses that are unconscionable, against public policy, or impose an unreasonable penalty.
• Is it legal for a company to deduct money from my salary without telling me? No. The Code on Wages, 2019, provides a specific list of permissible deductions. Any deduction outside of this list, especially without the employee’s written authorization, is illegal.
• Can my employer withhold my experience or relieving letter? No. Withholding experience and relieving letters as a tactic to recover disputed money is illegal. These documents certify your employment period and are your right. You can take legal action to obtain them.
• Is a relocation bonus clawback legal if the company forced me to move? This is highly contestable. If the relocation was not voluntary but a condition of continued employment, demanding its return upon resignation can be challenged as an unfair and restrictive practice.

What evidence is required?

To build a strong case, you will need the following evidence:

• The Employment Agreement or Appointment Letter containing the bonus clauses.
• All email communication with HR and management regarding your resignation, notice period, and early release request.
• Emails or official letters mandating your relocation.
• Salary slips from before and after the deduction was made.
• Bank statements showing the credit of the bonuses and the subsequent deduction from your salary.
• The company’s HR policy handbook, if available.

How long will the investigation take?

This is a civil legal process, not a criminal investigation. The timeline varies depending on the path taken:

• Legal Notice: The company is typically given 15 to 30 days to respond to a legal notice.
• Labour Commissioner: The conciliation process before the Labour Commissioner can take several months. If it fails, the matter is referred to the Labour Court.
• Civil Court: A suit for recovery in a civil court is a more prolonged process. It can take anywhere from a year to several years to get a final judgment, depending on the court’s schedule and the complexity of the case.

Advocate Sudhir Rao, Supreme Court of India