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Paytm Agrees to Notice Period Payment After Labour Ministry Steps In

Paytm has agreed to compensate a former employee following a forced resignation. This decision comes after significant legal and public pressure, highlighting the ongoing challenges companies face in managing internal disputes and employee relations.

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After the intervention of the Labour Ministry, Paytm has agreed to pay the notice period payment to a former employee. The Ministry of Labour and Employment announced a significant development concerning the fintech giant Paytm. This resolution followed a series of complaints by former employees alleging unlawful termination without compensation.

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In response to a petition by an ex-employee, the ministry disclosed that Paytm has agreed not to recover the joining bonus from the aggrieved party. Additionally, the company committed to paying the notice period amount. This decision emerged after Paytm representatives met with the Regional Labour Commissioner (Central) in Bengaluru.

"The representative of Paytm’s management appeared before the Regional Labour Commissioner in Bengaluru on Wednesday and agreed not to reclaim the joining bonus, and to provide the employee with the notice period payment,” stated the ministry.

Labour Ministry's Second Intervention in Startup's Business in the Past Month

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This is the second such incident in the last one month when the Labour Ministry had to intervene in a startup's business. Recently, Karnataka Labour Minister Santosh Lad met with representatives from Think and Learn Pvt Ltd, the parent company of Byju's, to address concerns regarding unpaid dues owed to former employees. According to the report, Minister Lad instructed the ed-tech firm's officials during the meeting in Bengaluru to promptly settle 50% of the outstanding dues to ex-employees, with assurances that the remaining 50% would be paid in due course.

What Are The Grievances of the Employee against Paytm?

The issue began when several ex-employees of Paytm approached the Ministry of Labour in June, accusing the company of forced termination without due compensation. These complaints led to the Regional Labour Commissioner summoning Paytm for a hearing.

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The status of other employees remains uncertain, as dissatisfaction persists among those who claim Paytm mishandled their terminations. The labour ministry's intervention highlights ongoing concerns about corporate governance and employee rights within the fintech sector.

Regulatory Scrutiny and Restructuring

Earlier this year, Paytm Payments Bank Limited (PPBL), a subsidiary of Paytm, faced regulatory scrutiny when the Reserve Bank of India (RBI) halted new deposits citing "material supervisory concerns" and non-compliance with rules. This regulatory action spurred a significant restructuring effort at Paytm, including widespread employee rationalization.

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Summons and Legal Proceedings

Following the employees' complaints, the Regional Labour Commissioner issued a notice to One97 Communications, Paytm's parent company. The notice required Paytm's representatives and the complainants to present relevant records at the labour office.

The notice emphasized the necessity for both parties to appear and discuss the allegations of forced terminations without pay. 

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Paytm's Response

In response to the allegations, a Paytm spokesperson emphasized the company's appreciation for its employees' contributions. "We value the contributions of all our employees and remain humbled by their dedication. The decision to transition some employees has been a difficult one for all parties involved, and was made only after careful consideration of all available options," the spokesperson said.

Paytm elaborated that it strives to support transitioning employees and ensure fairness and transparency throughout the process. However, the employees who were allegedly forced to "voluntarily resign" without severance have sought intervention via the ministry’s Samadhan portal and other grievance channels.

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Impact of RBI's Ban

The RBI's ban on Paytm Payments Bank significantly impacted the company's operations, prompting a large-scale restructuring. In a letter to shareholders on May 22, Paytm founder and CEO Vijay Shekhar Sharma outlined plans to focus on core businesses and enhance cost efficiencies. Sharma hinted at potential layoffs, citing rising employee costs due to investments in tech and financial services.

"We will continue to invest in our merchant sales team and risk and compliance functions while taking steps to cut employee costs," Sharma stated. He projected that these measures could save the company Rs 400-500 crore annually.

The recent developments highlight the complexities of corporate restructuring and regulatory compliance within India's burgeoning fintech industry. While Paytm's concessions offer some relief to the aggrieved employees, the broader implications of these disputes underscore the need for robust employee rights and corporate governance mechanisms.

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