3-month notice period: Here’s everything you need to know about the policy | Hush

3-month notice period: Here’s everything you need to know about the policy

Both employees and industry experts agree that it’s time to reevaluate a prolonged notice period at most Indian IT companies.

“Seven years here now. Salary is average compared to my friends. Most companies are not interested when I mention a 3-month notice period. How do I get out of this rut?” reads an employee discussion thread on the Hush App.

A mandatory, non-negotiable 3-month notice period at leading IT firms inconveniences many employees. These employees miss out on better employment opportunities.

In fact, this concern only reiterates a larger share of similar online ​threads​ and even​ petitions (some with more than 50 thousand signatures). In these petitions, employees repeatedly question the purpose behind ‘an unreasonable policy’.

So, how does a 3-month notice period policy work? Has it evolved over the years with the changing recruiting landscape? Unlike other countries, what warrants the 90-day notice in India?

The Hush team spoke to many employers, HR executives, and employees to understand this less addressed workplace policy issue.

The whys and wherefores

A notice period is the time that an employee serves from when they quit to their last working day. It also applies to employers who give a certain period of notice to employees, before termination.

The length of this notice varies across countries and job sectors. However, an outgoing employee’s expected formalities largely remain the same. This includes an effective knowledge transfer (KT) to a backup resource and the settlement of accounts relating to the employee’s claims. It also includes their entitlements, transfer of benefits, payment of gratuity, release of relieving documents, etc.

Nagesh Saralaya, 31, has recruiting experience in both IT and banking sectors. When asked to prioritize reasons validating the existence of a 3-month notice period in Indian service-based companies, he says,

Lengthy notice period helps in employee retention and also in buying time to replace the resource.

Most of the industry experts do not recall a specific period in time when the 3-month notice period policy turned into an industry practice. Manoj Kumar is the founder of HR Analytics think-tank WorkplaceIf. According to him, the trend apparently started when multinational companies began outsourcing their services.

“The policy has its roots in offshoring activities because it involves clients stressing upon service-based companies on efficient KT to a backfilling resource,” he says.

Unique to Indian job-market

In many aspects, the 3-month notice period is quite unique to the Indian job market. Here, it applies to even entry level employees working in the IT sector. The United States of America follows an “employment-at-will” policy regarding termination. In this policy, both parties (company and employee) can end the employment at will at any time, without any notice or providing any reason. Based on goodwill, people agree upon a customary two weeks’ notice.

In fact, data from Mercer’s “Global HR Factbook” outlined the minimum legal requirements for

notice periods across 43 countries. This data insinuated that employees resigning in the US, Mexico, Hong Kong, Ireland, Singapore, and the UK have the shortest (one week) statutory notice period. The same study also listed countries like Switzerland, Slovakia, and the Czech Republic to have two months’ notices.

In most European countries, notice periods increase depending on the number of years an employee has served in a company. It may also vary with certain high ranking leadership roles. China and Japan observe infrequent job changing among its working population. However, East-Asian economies obligate a month’s notice.

Big companies dictate trends

In India, the 3-month notice period rule began to thrive with many leading IT companies. They adopted it as part of their employment policies and set off the trend. “However, it has by and large become a norm for most IT firms now,” shares Rajesh Kumar Singh, HR Head, KPIT Technologies.

Nagesh is a Regional HR Manager at Kotak Mahindra Life Insurance Ltd. Talking from a company specific perspective, he states that the 3-month period is indispensable in a competitive industry.

“Imagine if you are the only company mandating a 1-month notice period, then you would be scapegoated by competitors, who would take advantage by poaching your resources,” he says.

Mitalee Dabral is the Global HR head of an Engineering Solutions company. She stresses that the pace of economy growths and job market standards dictate the length of the notice period.

She is also vocal about the kind of recruiting challenges that lengthy notice periods have posed to employers.

Unlike bigger multi-nationals, the replacement cost and turnaround time to backfill a resource might be huge for smaller companies who cannot afford to have the concept of bench (a set of employees who could act as backup resources) to ensure a resigning employee is also productive during the notice period is difficult too, she says.

3-month notice—A mere retention tool?

Hush conducted a survey for over 1400 respondents. Around 90 percent answered in affirmative to a question that enquires the misuse of the 3-month notice period by employers. Employers may use it as a retention tool that cuts down attrition rates.

“It is just a tactic to make sure the employee does not switch to another company as most

employers are not willing to wait for three long months to on board a new resource,” shares 27-year-old Rohini. H. J, who has over four years of work experience in the IT sector.

3 month notice survey Often failure to serve the full notice period might lead to consequences like blacklisting, blocking certain relieving documents, and in extreme cases suing for a breach of contract.

It is kind of hypocritical for big MNCs to force outgoing employees to negotiate on the farthest joining date (with their new company) possible when they want newcomers to join as early as possible, says a 25-year old, ex-Accenture employee, who wishes to remain unidentified.

Mitalee disagrees from the employer standpoint. She feels it is difficult to retain employees who have already made up their mind to quit.

“At best, you can play around with a company’s attrition data, which is not good in the longer run,” she says.

Business criticality and favouritism

In the Hush survey, 80 percent felt that favouritism plays a role in an employee being relieved earlier than their stipulated notice period.

“The length of the notice to be served is hugely dependent on business criticality and your rapport with the immediate boss/manager,” shares a 36-year old female employee. He/she has recently quit a prominent software company after putting in close to 15 years of work.

A retired consultant with over three decades of experience at TCS explains how and why the nature of skills being transferred tend to influence notice periods. He says, “When the demand for skills is more, the company’s expectations for an individual to join will always be about a month—however, the release of its employees will be longer. On the contrary, when the supply is more than the demand for skills, the situation reverses.”

Often a longer notice period in many IT companies is justified on the basis of an efficient KT. But a staggering 90 percent of the employees who took the Hush survey do not agree.

Kousthub Belur worked for about three years with a leading IT firm, before pursuing further studies abroad. He agrees that an optimum time period is required for resourceful KT. However, he also feels that three months is long.

If KT requires more than 45 days, it means that there is over dependency on a single person in a particular project, shares the 25-year-old.

Negotiable grounds, exemptions

Most Indian IT companies work on a service-based model. Here, many of their employees work for customers in certain billing periods. In such cases, it is easy to wonder why there is an inconsistency among IT companies itself. Especially, when it comes to the length of notice periods.

“At the level of an organization, it could be inferred that the nature of work is similar. However, when you drill down customer needs, expectations, and contractual obligations, the commitments can drive into varied complexities,” reasons the ex-consultant from TCS, who also believes that the fundamental driver in most notice period negotiations is evaluating who needs whom the most.

Mitalee knows most hiring companies acquire new talent and are not willing to wait for three months to fill up a vacancy. “And that’s precisely why it is kept negotiable,” she reiterates.

In some cases, people do not serve the full notice. Some of the most common grounds are buy-outs, medical complications, personal crises, higher education, marriage, and associated migrations.

There are cases where exemptions are not applicable. In such cases, employees are frequently inconvenienced by missing out on competitive offers that may mark their career growth.

I got a couple of screening calls and after learning that I have a 3-month notice period, they never called back despite me telling them that I can negotiate and get it shortened post getting an offer, shares a 36-year-old employee, name undisclosed, narrating the kind of hassle they had to face while considering a career shift from a leading company.

Manoj has an aversion to employers who push their employees to join as early as possible.

“Almost all HR executives know of the standard practices. Yet, it is unfair for some of them to use pressure tactics on employees to convince their incumbent companies to shorten their notice time”.

In agreement with many employers we spoke to, Mitalee also considers outgoing employees to be the biggest ambassadors of a company’s reputation.

“No employer wants to end terms with an employee on a bitter note. Hence, the moral compass often lies with HR personnel to rise above all biases and negotiate on reasonable grounds to shorten notice periods and yet ensure smoother transitions,” she opines.

Need for dialogue and recommendations

Hush also spoke to a group of IT employees at the project manager level. This was in a leading IT company headquartered at Bangalore. When questioned about the strategy of a few employees who first put down papers and then began to look for jobs so as to avoid serving a notice, most of these key informants felt that it was ‘a realistic yet risky route to take’.

A female employee shared, “Only those who are privileged to have savings handy and not have many responsibilities to take care of can afford the same.”

In the same discussion, an employee stated that ‘some employees keep giving interviews with their notice periods. This is after they have a stable offer in hand, leading to lobbying on salary packages’. This may lead to employers dealing with ambiguous situations. For instance, they may have to doubt an employee’s real intention to join a certain company.

Rajesh Kumar Singh is of the opinion that a 3-months’ notice does not necessarily impact all employees in a negative way.

“In certain termination cases, a 3-month notice period also acts as a cushion to ensure employee welfare and avoid undesirable consequences”.

The 42-year-old advocates for better dialogue among bigger IT companies. This is to cut down on lengthy notice periods and adopt uniform guidelines. Around 83 percent of all respondents who took the Hush survey also voted for 1-month to be the ideal length of a notice period that IT companies should espouse.

In my personal opinion, notice periods should range from a bare minimal of 15 days to maximum 45 days in any industry for any role, except the CXOs where the entire handover would take longer time, says Nagesh.

He supports the cause with a list of recommendations that could initiate discussions and bring in place standard best practices:

Building processes for better business delivery continuance Creating platforms where knowledge sharing happens across employees rather than just relying on ‘Handover Takeover’ (HOTO) when an employee resigns Creating a workplace environment where an employee develops an emotional connect with the company

Legal enforcement and government intervention

Hush spoke to a group of project managers insisting the need for a progressive intervention on 3-month notice period rule. While one employee termed it as a ‘ridiculous policy’, the other one stressed on the need to relook at it. This was especially at a time when more open-minded millennials are entering the industry.

Rahul Kejriwal briefly served at the Ministry of Labour and Employment. He is now the program director at ‘Next IAS’. He shares that there is a lack of clarity on legalities governing notice period policies in India. This leads to many big MNCs exploiting it in the form of a coercive tool.

Terming the 3-months’ notice as a ‘wasteful exercise,’ the 30-year old states this is an important employee concern. He also believes that the Ministry of Labour and Employment should deliberate upon this.

It may involve drafting a tricky legislation, but to begin with the Ministry should consider bringing in a model code that IT companies can follow.

Some investor friendly states across the country have exempted IT companies from adhering to the labour laws of India.

Karnataka and Tamil Nadu have extended exemptions for IT companies for provisions under ‘The Industrial Employment (Standing Orders) Act 1946’. This mandates 1 months’ notice period for ‘workmen’. However, this is except for those holding managerial positions.

Rajesh Singh states that the latest ‘Shops and Establishment Act’ (covered under individual state legislation) is also silent on directives with regard to notice periods.

The Central government, which is ideally the model employer for most companies, also mandates a 3-month notice period. This is not a pressing need to be addressed, unlike other employee concerns/priorities. The dialogue though (if it has to begin) should start among the bigger MNCs, he says.

“The larger policy goal, however, should be to cap the maximum limit of notice periods to a much shorter duration to free up the labour market (in which transitions are easier for both the employee and the employer),” concludes Rahul.

Millennials redefine the code and conduct of conventional workspaces. Hence, the need to have a meaningful dialogue in capping lengthier notice periods is more pertinent than ever. However, to what extent can timely policy interventions help in this regard? Only time can tell.

Originally Published on​ Hush.company ​on 12th December 2018