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HCL stands by legality of its bonus clawback scheme

Indian services giant says taking back cash did not violate employment laws – union begs to differ

Indian IT services giant HCL Technologies has told India's Labour Commissioner that its controversial decision to recover bonuses paid to staff who later resigned was not illegal.

News of the demand for repayments emerged in January 2022, when the Nascent Information Technology Employees Senate (NITES), an organisation that represents Indian IT workers, complained that some former HCL staff had been required to repay bonuses they had been pre-paid before resigning from the company.

HCL framed the prepayment of bonuses as a goodwill gesture "to help people with more cash flows" during an investors' call in January 2021.

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NITES took the matter to India's Labour Commissioner. Documents on HCL letterhead date-stamped last week, sent to the Commissioner and seen by The Register, request the case be dismissed on grounds because HCL did nothing wrong.

The company also asked India's Labour Ministry to order NITES to cease "any attempts to intervene in [the company's] internal and administrative matters," calling the allegations from the labor union "baseless, misleading and frivolous." It also wants the Labour Ministry to bar NITES from contacting media regarding the case.

According to NITES president Harpreet Singh Saluja, the average bonus amount per employee is nearly ₨120,000 ($1578) but HCL has asked for amounts up to ₨170,000 ($2,300).

Many employees have reported the clawback has created an undue burden, as they had already spent the money before receiving notices of demand to repay the funds to HCL. Others claim the bonus payment was deducted from their final pay packet. In addition to receiving these notices, many have reported that HCL has not provided documents needed to terminate their employment until payment is made.

The bonus repayment policy affected two different bonuses: an Employee Performance Bonus (EPB) and an advance monthly performance bonus (APMB). The latter is a project-specific bonus and is not paid to every employee.

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After The Register reported the clawbacks and anger at the repayment requests, HCL stopped requiring repayment of the EPB as of December 22, 2021. However, the company continued to demand repayment of EPB bonuses paid prior to that date, and of APMB payments.

By early February, HCL shifted its strategy from sending letters of demand to sending legal notices to former staffers.

The crux of HCL's argument to the Labour Commissioner is that the bonuses were tied to performance and ongoing employment, rather than being a statutory bonus required under Indian law. The company believes it therefore has a "contractual right to clawback such variable amount."

According to NITES' Saluja, employment at any time is the only criterion required to retain bonus payments already received. Bonus adjustments for poor performance and other variables are applied to future payouts.

A special provision

"The company has falsely claimed that the bonus being recovered from employees of HCL Technologies Ltd is contractual bonus and not statutory bonus," Saluja told The Register. "The Act contains a special provision, Section 31A, which deals with payment of bonus linked with production or productivity. The section applies only when there is an agreement between the employer and the employees to this effect, and not otherwise."

The bonus recovery policy was communicated to the workforce in November 2021 for bonuses that went back as far as April 2021 – not at the outset of an employee's contract. Nor was the policy negotiated later with staff after that time.

"Per law if the bonus is performance based then there must be an agreement or settlement entered into between the employees and the company," said Saluja, adding "Even if they mention it in the employment letter, it contravenes Indian Contract Act for favoring one party."

Saluja also disputes HCL's point that it is working in good faith for the best interest of its employees.

"We have all the evidences as to how the company is harassing employees by sending them legal notices even for recovery of ₨7000 ($92)," said Saluja. "It is also to be noted that such a recovery of policy without any statutory approval is resulting in a hardship and it far outweighs the equitable balance of the employer's right to recover. We have full faith in the authorities and will keep striving hard until we get justice for all the HCL employees."

HCL, for its part, has framed its arguments as relieving the Labour Commission of needless work.

The Register has reached out to HCL Technologies for further comment but had not received any response at the time of publication. ®

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