Industrial Relations And Labour Laws
Partner - Risk Management
Personnel Manager
+1 Other

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During the internal check we found that one of our employee who is the Branch Incharge has misappropriated money received from our customers for payment by not depositing in the bank and misused the same for his personal use.
During investigation he confessed and given in writing about the misuse of company money.
Now kindly guide me for the following
1. Can we terminate him straightaway immediately without any show cause/chargesheet for misuse of company funds. Is it legal? Else suggest necessary action to be taken
2. Can the misused money be recovered from his Gratuity Payable and his salary payable for this month. The misused money is more than his gratuity payable. He is not in a position to return back the misused money
3. Do we need to get his consent in writing for recovery of amount from his gratuity
Immediate reply will be most helpful to take action.

From India, Madras
You cannot terminate the employee without conducting an enquiry and proving that he is guilty even though he has admitted his guilt. Therefore, frame detailed charge sheet with amount misappropriated and conduct enquiry appointing an independent person as Enquiry Officer and then proceed according to the reports only.

Gratuity cannot be withheld for an offence like this. As per section 4 (6) (a) of the Payment of Gratuity Act, gratuity can be be forfeited to the extent of loss caused to the company by willful and negligent act or omission of the employee. That means that there should be proof that there was misappropriation of fund and by that act (which is obviously willful act only) the Bank/ company has caused a loss or damage. For this a thorough enquiry is a must and if you just take his statement that he had misappropriated the money and the same could be recovered from his gratuity and you did it and released him, then you will be in trouble. He can lodge a complaint that he has not received gratuity and when a dispute comes in if he denies the charges of misappropriation of money and whatever he has given in writing was false and he was forced to write like that, you would have no other choice but to pay the gratuity or even to reinstate him on the ground that procedure was not followed. Therefore, it is always better to go as per procedure. Till then you can hold the gratuity but not in your hands but by depositing the gratuity amount with the Labour Authorities who are the appropriate authorities under the Payment of Gratuity Act.



From India, Kannur
You should consider lodging a police complain for fraud. It will strengthen your position when you take action against him. But beware of the fact the our police are completely corrupt and don't do anything without getting money out of you.
In case of fraud, misappropriation and moral tripletude ou can set of the gratuity against the amount of fraud. Suspen him immediately (or orally ask him not to come to work). If factories act or shop and establishment act apply (ref standing orders) call for an inquiry immediately (remember during suspension he gets 50% salary). Get the investigation closed quickly. Statement of the customer etc will help.
Madhu is right in being cautious, but you do not have to pay the gratuity or deposit it with the authorities. If he complains, you need to give all details of the circumstances to explain that it is not payable. I doubt if he will take a risk on that route.

From India, Mumbai
Mr.Madhu has correctly laid down the procedure. You cannot recover the amount misappropriated from the gratuity payable to the employee unless the misconduct is proved in a domestic enquiry. This is the legal requirement. The Gratuity Act does not entitle you to wthhold gratuity on mere allegation of misappropriation since gratuity is no longer a bounty to be given by an employer. If the employee compalins to the Controlling Authority you will be laiable to pay gratuity with interst for teh period it was wrongly withheld by you.

From India, Mumbai
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