Unpaid salary

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2012 Dear all,

We have our details as under:

Unpaid salary (For 09-10): 10L
Bonus Salary (For 06-07, 07-08, 08-09) : 30L
Leave Encashment payable: 19L
Other credit balances of employees: 2L

All the liablities are unclaimed. Most of the employees have left the org without Full & final Settlement.

Please guide whether we can write back the amount in Profit & loss account or we need to transfer the amount in any government fund under any law in force in India(with references ) after a a certain period of time (like it is done in investors protection fund in case of unpaid dividends after 7 years) .

Also we have a debit balances of employees like tour advance recovery, other loan & advances. can we adjust the amount with the liablities as above.???

Amol S Joglekar

Amol S Joglekar (Expert)
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23 July 2012 The balances have to be written back after reasonable period of time. ( The reasonableness will differ from case to case) Do not forget to pass the resolution to that effect provided you are a COMPANY.

Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2012 some more views???

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here’s a detailed guidance on your issue regarding **unpaid salary, bonus, leave encashment & other employee liabilities** which are unclaimed:

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### 1. Writing Back Unpaid Liabilities (Salary, Bonus, Leave Encashment)

* **General Principle:**
These unpaid amounts are *liabilities* for the company and should remain on the books until paid or legally discharged.

* **Can you write back to P\&L?**
No, you **cannot simply write back** these unpaid liabilities to the Profit & Loss account because they represent genuine employee dues. Writing back would violate accounting and legal principles.

* **Is there a statutory period after which you can write back?**
Unlike **unpaid dividends** which get transferred to the Investor Education and Protection Fund (IEPF) after 7 years under the Companies Act, **no similar provision exists for unpaid employee dues**.

* **Transfer to Government Fund?**
There is **no government fund or statutory mechanism** like IEPF where unpaid salary, bonus, or leave encashment can be transferred after a certain period.

* **What to do after a long period?**

* Keep these as liabilities on the books.
* Attempt to contact employees for settlement.
* If employees are untraceable and company wants to remove liabilities, legal advice and employee consent or court approval may be required.

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### 2. Other Credit Balances of Employees (e.g., advances)

* These represent assets (recoverables) for the company.

* **Can you adjust these against liabilities?**
Yes, in accounting practice, it is reasonable to **adjust recoverable amounts from employees (like loans, advances) against unpaid dues like salary or bonus**, provided:

* You have proper documentation/consent.
* The set-off is legally permissible under terms of employment or agreement.
* Accounting entries clearly reflect this adjustment.

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### 3. Summary & Recommendations

| Particulars | Action | Reference/Notes |
| ------------------------- | --------------------------------------- | --------------------------------------------- |
| Unpaid Salary/Bonus/Leave | Keep as liability; don’t write back | No statutory fund like IEPF for employee dues |
| Employee Credit Balances | Adjust against liabilities if permitted | Document consent/agreement needed |
| Unclaimed Liabilities | Maintain on books until settled | Consult legal counsel for long-unclaimed dues |

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### 4. Legal References

* **Companies Act, 2013:**
No provision like IEPF for unpaid employee dues.

* **Accounting Standards (AS 29 - Provisions, Contingent Liabilities and Contingent Assets):**
Liabilities should be recognized until discharged.

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### Final Suggestion

* Keep the unpaid salary, bonus, leave encashment as liabilities indefinitely.
* Adjust employee advances against liabilities if possible and documented.
* Make efforts to settle dues with employees or their legal heirs.
* Consult legal experts if you want to explore writing back or removing these from books.

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If you want, I can help draft an internal policy or letter regarding adjustment or dealing with such unclaimed liabilities. Would you like that?

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