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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
A contractual right to recover money already paid, such as a joining bonus, relocation cost or training cost, if the employee leaves before a set period. Recovery is usually made in the full and final settlement, and how far it can be enforced depends on the clause being reasonable and agreed in writing.
A clawback usually starts at the offer stage, when HR includes a joining bonus or relocation payment with a condition that it is repaid if the employee leaves within, say, twelve months. The clause has to be in the offer or a separate agreement the employee signs.
Example: a ₹1,20,000 joining bonus with a twelve-month retention period, and the employee resigns after eight months. A pro-rata clause would recover ₹40,000 for the four months not served. Pro-rata recovery is easier to defend as reasonable than recovering the full amount.
At exit, payroll applies the recovery in the full and final settlement, but only up to the dues available. If the recovery exceeds the dues, the balance becomes a separate demand to the employee. The common mistake is recovering an amount not mentioned in any signed document, which is hard to sustain if challenged. Check deductions against the applicable wage law before setting them off.
Commonly a joining bonus, relocation support or the cost of sponsored training. The clause should name exactly what is recoverable and for how long.
A pro-rated clawback, where the recoverable amount reduces with time served, is easier to defend as reasonable than a flat full recovery.
Deductions from wages are limited by wage law for covered employees, so recovery is usually made against the full and final settlement, with the employee's written agreement on file.
The employer has to ask the employee to repay the balance, and enforcement then depends on the contract and civil remedies. Many employers keep amounts modest for this reason.
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