Is It Legal to Deduct from Gratuity or Pay Notice Period on Basic Salary Only?

Happy Holy

A. While employees are retrenched or terminated, they are being paid the notice period based on the basic pay only. It is observed that many employers are charging the gross salary against unnerved notice period. Is it correct in law? What is the rule?

B. At the time of full and final settlement of an outgoing employee, can any employer recover or deduct outstanding amounts from the gratuity amount? Or can gratuity be adjusted against outstanding?

Best wishes,

Shaukat Hussain
+919414169247

Compensation is always worked out based on the basic salary and dearness allowances. However, if the salary is structured in such a way that the basic salary is limited to a small amount to reduce the burden of various statutory contributions and payments by the employer, such as PF, Bonus, etc., and if the worker can prove that the total salary is structured as Basic + HRA + other allowances solely for the employer's convenience, and at the same time, the employer used to collect NOTICE PAY on GROSS SALARY, then compensation on retrenchment should also be calculated based on that gross salary.

The amount of gratuity payable to an employee should not be adjusted against any dues from the employee. Even a loan from the company cannot be offset against gratuity. Gratuity can only be forfeited to the extent of damages caused by the employee due to a militant attitude during the course of employment. Similarly, gratuity can be withheld if the employee is dismissed for an offense involving moral turpitude and not for any offense less than that.

Regards,

Madhu.T.K

I wanted to clarify a doubt regarding minimum wages: should it be based on basic or gross wages? Minimum wages, as prescribed by the government, vary in every state.

Regards,
Shaukat Hussain