Is It Legal for Companies to Reclaim Bonuses and Ex-Gratia Payments After Resignation?

Clawback of Bonuses and Ex-Gratia Payments: Legal Considerations

Co XYZ takes back bonuses and ex-gratia (whatever they have paid within 1 year of resigning) from employees who are resigning. Is it illegal, and can we go to any court or legal authority against this?

In this situation, it is important to review the terms of employment and any agreements signed by the employees. If the company has a policy allowing for the clawback of bonuses and ex-gratia payments under certain circumstances, it may not be illegal. However, if this action is not specified in any documentation or is done unfairly, it could potentially be challenged legally. It is advisable to seek legal advice to understand the rights and options available in this scenario.

Could you please bring more clarity into your query? You mentioned 'within 1 yr of resigning'. Was it supposed to be 'within 1 yr of joining'? Please clarify. Also, it would ensure you get the right responses if you provide more details about the specific case in question.

Regards,
TS

Reclaiming Bonuses and Ex-Gratia After Resignation

If an employee resigns from services at any point in time, the bank is entitled to reclaim the bonus and ex-gratia they have received within 1 year from the date of resignation. For example, if ABC resigns today, they will be required to repay all the bonus and ex-gratia received since 10/10/2010, i.e., within 1 year.

Part A: Bonus Payment Requirements
To the best of my knowledge, bonus payment is mandatory for all employees drawing Rs 15,000 or less as per the new amendment. This is a minimum of 8% of the basic salary, limited to Rs 5,000. The bonus should be paid 8 months after the close of the financial year.

Part B: Types of Bonuses and Agreements
Now, what type of bonus are they paying? Is it a performance bonus that is payable as a retention tool and based on annual performance? What is the time period for consideration?

Has there been any written agreement between the employer and the employee stating that the employee needs to repay the bonus amount if he/she leaves the organization within a stipulated time after receiving the bonus?

If the answer is as per Part A, then the bank is engaging in malpractice and should be addressed in writing with the HR or an internal redressal committee. If it is Part B, then the terms of the agreement need to be verified. In any case, to the best of my knowledge, the bank is engaging in unfair and unethical HR practices.

Ex-Gratia and Gratuity Payments
Regarding ex-gratia or gratuity, the same is paid upon completion of 4 years and 10 months of service as per the Payment of Gratuity Act, with a maximum limit of Rs 350,000 (non-taxable). It is calculated as 15 days of basic salary multiplied by the number of years worked. Unless this has been paid indicating it as gratuity money in advance and the employee has not technically completed 4 years and 10 months of continuous service.