Allah says (interpretation of the meaning):
“Verily, Allaah commands that you should render back the trusts to those, to whom they are due; and that when you judge between men, you judge with justice”
And the Prophet (blessings and peace of Allah be upon him) said: “There is no person to whom Allaah has given responsibility and dies neglecting that responsibility, but Allaah will deny him Paradise.” (Agreed upon).
He also said: “Each of you is a shepherd, and each of you is responsible for his flock.” (Agreed upon)
This includes employees, managers, supervisors and bosses. Each of them is a shepherd with regard to what he is responsible for of the company’s wealth, and he will be asked about that on the Day of Resurrection.
Even though the company has given your direct manager the authority to approve extra hours and payment for them, it only did that because it had determined that there was a need for that additional work. If there is no need for additional work, or there is no additional work in the first place, then the managers giving the employees payment, when they are not entitled to it, is deceit and betrayal of the trust. It is not permissible to accept these wages, because they are wages for work that was not done.
The Standing Committee was asked:
Is it permissible for me to accept a bonus for hours that I do in addition to my regular hours, i.e., if I come for the evening hours and stayed throughout that period, even though there was no work there?
The committee replied:
If you can do your regular office work and complete it during regular hours, and there is no work to be done during your time at work outside of regular hours, then it is not permissible for you to accept this additional work and it is not permissible for you to take the money that is given to you in this way, because the bonus for additional work outside of regular hours should be paid to the one who does work at that time and cannot do it during his regular hours. As you are not doing any work during the extra hours to qualify you for the bonus, you must keep away from it, so that you will be free of any sin, so long as the situation is as you have described. End quote.
Fataawa al-Lajnah al-Daa’imah, 14/404-406
Shaykh Ibn ‘Uthaymeen (may Allaah have mercy on him) was asked:
I am a government employee, and I am sometimes asked to do extra work. The department where I work has asked me and some of my colleagues to do some work outside of regular hours for 45 days, and I was keen to attend with my colleagues at work, but they did not tell me about that. When I asked one of them he said to me: Your turn has not come yet. Then when that period ended, my colleagues and I were paid for that work. I am confused – is this money halaal or haraam? Please note that my boss and the head of the department were pleased with my work and they regard me as a good employee, and this money may be a reward for my keenness and good work, because my salary is low. If this money is not halaal, what should I do with it?
This question comes up often. I ask you now: is this true or false? i.e., if a person got paid for a certain task, did he do the job or not? If he did not do the job, then he has taken this money unlawfully, and taking money unlawfully comes under the heading of consuming wealth unlawfully, as well as being a betrayal of the trust, and if the boss agreed to this action then he is also betraying the trust. The money is not his, even if he disposes of it as he wishes.
I would like to take this opportunity to warn bosses and managers who do such things: fear Allah with regard to what you are in charge of, fear Allah with regard to those employees who are under your supervision, do not give them that which is not permissible for them, and do not betray the state by giving to those who are not entitled to it. End quote.
Liqa’ al-Baab al-Maftooh, 22/114
What the Muslim must do is fear Allah, and strive to ensure that his food and drink are halaal, for Allah does not bless haraam wealth for a person. Muslim (1015) narrated that the Prophet (blessings and peace of Allah be upon him) mentioned a man who has undertaken a lengthy journey and is disheveled and dusty, raising his hands towards heaven and saying, ‘O Lord, O Lord!’ but his food is haraam, his drink is haraam, his clothing is haraam, he is nourished with haraam so how can he receive a response?”
Even though the boss is the one who is responsible for asking for more wages and extra work -- as the questioner says -- he is restricted by the rules and regulations that govern the work of the company. He must follow them himself as must the employees working under him, so long as that does not go against the laws of Allah.
Undoubtedly the regulations of any company forbid getting wages or paying salaries for imaginary work or work that is not done. Rather what the one who is allowed to do so by the company must do is strive to increase your salary and to expedite that, so long as you deserve it, and he should not give you payment for work that you have not done.
The boss and all those under his supervision must pay attention to that. In the event that he has gone against that, he must repent and give up this betrayal, and he must also return the money that has been acquired in this improper way to the company, if he can do that, under any clause of the regulations that allow him to do so.
If he cannot do that, then he may pay it spend it in the interests of the company.
And if he cannot do that, which seems to us to be unlikely, then he may give it in charity to the poor and needy on behalf of its owners.
See also the answer to question number 111913.