Harish Shenoy

We seek your clarification regarding the gratuity payable to one of our employee, who has absented from duty since 05.11.2016. (last year)
The said Employee is working in our company from 02.11.2007 as Assistant Engineer in Machine shop department. He has not been coming to office from 05.11.2016 to till date. We had issued him a notice for absenteeism.
The said employee has taken a personal loan from Bank. The Company had undertaken to credit his salary every month till the closure of the loan and seek “NOC” from the Bank before disbursing terminal benefits arising out of resignation/termination/retirement etc..
The terminal benefits payable to the employee was lesser than the loan outstanding. Hence we could not get NOC from the Bank and the said employee could not be terminated.
The EMI for the loan availed by the employee is being deducted from the salary of the guarantor, who is also our employee.
The Basic+ VDA of the said employee was Rs. 10,532/- as on November 2016. His last working day was 05.11.2016. Due to non-availability of NOC from Bank even now he is on rolls with unauthorized leave (loss of pay).
Joining date is 02.11.2017
Last working date was 05.11.2016
Last Basic+ VDA drawn was Rs. 10,532/-
Relieving date from muster rolls will be on 30.11.17
Kindly advice what should be the gratuity amount payable to employee?. Should we apply the minimum wages as applicable under Electronic Industry for a skilled employee, i.e., Rs.12,065.60 or should we pay the last Basic+VDA paid, i.e., Rs.10,532/-.
Request to please inform me the calculation of gratuity.

From India, Bangalore
Labour Law & Hr Consultant
Consultant Trainer In Insurance, Adviser
Sr. Manager (p&a)
+1 Other


Dear Hari,
How comes the question of payment of gratuity to the employee when his services have not yet been terminated either on his own by way of resignation or by the employer by dismissal for the misconduct of unauthorized absence/abandonment of service?
Besides, pending dues of the personal loan availed of by the employee from an outside agency can not be a proper reason against taking disciplinary action for any misconduct committed by him as long as the employer is not a surety to the loan but given only an acceptance to deduct the due periodically and pay it.
Therefore initiate disciplinary action against him immediately for his unauthorised absence from 05-11-2016 by calling for his explanation, framing of charges, conducting a domestic enquiry, issuing second show-cause notice and finally passing a speaking order of dismissal. In case of no response from him at any stage or non-participation in the enquiry, based on the ex-parte enquiry, you can take the final action. But ensure service of the notices on him by publication in the local news paper in case of no response or by usual means of service.
Any period of unauthorized absence can not disentitle for gratuity for that period unless it is ordered by the employer as a break in service.
Even otherwise, the period of absence from 5-11-2016 can not be taken into a/c for the purpose of gratuity as he has been continuously absent.
Since the sum total of basic+D.A under the MW is more than that of your industry wages last payable, you have to take into a/c only the MW.
No necessity to obtain NOC from any outside creditor to the employee for the settlement of his statutory terminal benefits.

From India, Salem

Dear Hari Shenoy: You have Two issues 1. Payment of Terminal benefits 2. Issue related to obtaining NOC from the Bank for terminating the employee.
Please go through Section 4(1) of Payment of Gratuity ACt 1972-Payment of gratuity.
Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, —
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease
(6) Notwithstanding anything contained in sub-section (1): —
(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.
(b) the gratuity payable to an employee 16[may be wholly or partially forfeited]—
(i) if the services of such employee have been terminated for his riotous or disorderly
conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.
In the instant case, the employee has absconded and the Management has taken only steps for commencing the disciplinary action under service Rules as applicable. There fore the status of the employee is: " on Unauthorised absence". The question of termination comes only after final decision of the Management. Therefore it is too early to discuss the issue of Gratuity.
In the 2nd Issue: Management has agreed to recover the Loan in EMI out of his salary, and will disburse the Terminal benefits only after producing NOC from the Bank. This is only an understanding and a matter of good gesture of the Management in helping its employees. This condition may play a role-when the said employee resigns/ on Termination/on Retirement, and the Management settles the Terminal benefits ( as per Standing Instructions or Service Rules as applicable)without insisting for NOC from the Bank. It may also be noted that under Sec 14 of the Act (amended) Gratuity cannot be attached also.
There fore for taking disciplinary action against the absconded employee, question of "NOC" from the Bank doesn't arise and it has no role to play in the disciplinary proceedings.

From India, Bangalore

What is the reason to keep him on the rolls till date? Is your company does have certified standing orders ( Workmen) or HR policy on absent ism or Rules and regulation as in house rules for discipline and its course of action to be taken by the employer? Generally any organisation will wait for absent for 10 or 15 days. Thereafter it will start taking action per the rules and regulation in force. To be on safer side you can give an advertisement in the local paper of your region. Taking legal or following disciplinary action proceedings at this point of time will be complicated and finally you may to closed the issue a ex-party. If incase, you have his family members details please contact them and find about what happen to him before taking a final call and prepare his F&F with respect to the service rendered by him i.e 5.11.2016. Finally Gratuity can be forfeited as per the provisions of the Act as rightly mentioned above.

From India, Madipakkam

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