Is a Demoted Badli Workman Entitled to Gratuity After Termination?

One Mr. A was appointed in the services of a PSU as a permanent employee. During his course of employment, he was demoted as a Badli workman. After 13 years of service, he was terminated for being absent from his duties following a show-cause notice and due inquiry. My question is whether he is entitled to payment of gratuity or not?

Dear Kamlesh,

Gratuity under The Payment of Gratuity Act, 1972 can only be wholly or partially deducted in accordance with section 4(6). However, termination on account of absence does not seem to fall under this category. Before finalizing the matter, you may also go through this section.

Regards,

R.N. Khola

First of all, demotion of an employee from a confirmed post to Badli itself could be challenged as the word 'badli' stands for a vacancy caused due to the absence of a regular employee due to leave.

There may be two kinds of termination. If he was "DISCHARGED" from service (certainly after an inquiry), he is supposed to get gratuity and other applicable benefits. Whereas if he was "DISMISSED" from service, he is not supposed to get any gratuity and other benefits. Normally, for absence from work, no worker is dismissed but only discharged from service. Therefore, he is eligible for gratuity.

For calculating gratuity, his salary at the time of discharge/leaving and the length of service are the only factors considered. Therefore, it is immaterial whether he was demoted once. He will receive gratuity based on his last drawn salary (as a badli worker), but his date of joining the service, whether as a probationer, confirmed employee, or other, shall be taken into account to determine his eligible years of service.

Regards,

Madhu.T.K

Dear Madhu,

Your replies have always been crisp and sharp. I need clarification, which I have posted on this site a couple of times, but I have not received a clear answer so far. What is the difference between termination, discharge, and dismissal, and what benefits are deprived from the employees in these cases? Your earlier reply will be much appreciated.

Regards,
R. Sudhaakar

These three terms denote one and the same, i.e., cessation of employment. The words "termination" and "discharge" may be similar in many respects and may be used simultaneously as well. An employee may be terminated after his period of contract is over. An employee may also be terminated after giving him notice or paying him salary in lieu following the provisions of the ID Act. Here, it is more or less retrenchment.

The term "discharge" is used when the service of an employee is terminated due to negligence or misconduct, following an inquiry. In cases where the misconduct is of a very severe nature and no punishment less than dismissal is awarded, the employee is dismissed from service. A dismissed employee will not be eligible to receive benefits like gratuity or superannuation benefits from the company. Before awarding dismissal, a process of domestic inquiry should have been completed.

Regards,
Madhu.T.K

Dear Sir,

I require your expertise on these matters. When you employ persons with a salary less than Rs 10,000 and keep their basic pay below Rs 6,500, is it necessary to cover them under ESI & PF? We do not want to enter into a legal battle with PF authorities. My consultant says there is no need to cover them when they are on a consolidated salary, but my view is that they need to be covered. What is your opinion on this when a consolidated employee is employed under Rs 10,000 per month? Are ESI and PF applicable or not?

Regards,
R Sudhakar

Dear Mr. Sudhakar,

If the basic is less than 6500, then the employee has to be covered under the PF Act. If the wages (under ESI Act) are less than or equal to Rs 10,000, then they have to be covered under ESI. If on muster/paper, basic/gross wages are less than the requisite amount prescribed by the above-discussed Acts, then discussing a consolidated salary point will be futile.

Thank you.

If the basic salary is less than Rs 6,500, anyway he will be covered both by EPF and ESI. Whereas if we fix a consolidated salary of Rs 10,000 (at the time an employee joins), then he will be excluded from PF but will be covered by ESI. For ESI exemption, his salary should be at least Rs 10,001.

Now, just to avoid EPF, if you fix the salary at Rs 10,000 or Rs 10,001 to avoid ESI as well, suppose if, by notification, the government revises the salary limit for coverage to Rs 12,000 or something higher than Rs 10,000, you will have to give coverage then. Again, if you fix the salary (consolidated) at Rs 10,000, then his leave encashment and other entitlement in case of layoff, retrenchment, and even gratuity will be calculated on this consolidated amount only. We cannot put a full stop on bonus eligibility, which may also be raised at any time. Therefore, I feel it is better to go along with such social security measures.

Regards, Madhu.T.K