Can Ex-Gratia Be Included in Salary? Seeking Clarity on Salary Components

Dear Seniors, please clarify if the above amount can be a part of the salary. For instance, as below: Basic salary + HRA + Conveyance + PF + Ex-Gratia = Salary. Appreciate an early reply.

Thanks & Regards,
Ss

Hi All, the reason for asking this is because my payslip reflects the Ex Gratia payment included with the salary every month. Is this a correct practice by HR? I'd request seniors to give their inputs asap.

Thanks & Regards,
Ss

Understanding Ex Gratia in Salary Components

Ex Gratia cannot be a part of the salary. If I am not wrong, Ex Gratia is paid on some occasions to show extra gratitude towards the employee's work or job by the employer.

Please let me know if you need any further assistance.

Regards,

Dear Saji, thanks a million for the input. Please also clarify a few things for me. My appointment letter suggests Performance Commission, and in the Pay Slip, it's Ex Gratia. Which is correct, and can Performance Commission be included on the Pay Slip instead of the term Ex Gratia? In my view, both are incorrect to be added as part of your salary every month. Kindly suggest as soon as possible.

Thanks & Regards,
Ss

Yes, performance commission can be included in a payslip since it is based on your performance, which can be derived for a particular period, i.e., monthly, quarterly, yearly, etc. It is basically like a sales commission for sales personnel for achieving targets.

The word "ex-gratia" has not been defined in any labor enactment. As per the Oxford English Dictionary, ex gratia is a payment done from a sense of moral obligation rather than because of a legal requirement.

It is very clear, as per the pronouncement of various High Courts/Apex Court in their many judgments, that whether a particular item of payment is or is not a part of wages/salary must be decided independently of any contrary agreement between the parties. If the terms of appointment describe the payment of performance commission, it should be paid under the same head in the pay slip. The practice of an employer paying the same as ex gratia cannot be appreciated.

However, if any payment is made under the head ex gratia on a monthly basis, that would attract contributions towards PF/ESI. Any payment as ex gratia, at best, can be termed as an allowance and can be paid through the pay sheet for the purposes of CTC.

Regards,
Pkjain

What is the difference between Performance Commission and Ex Gratia payment? In my appointment letter, the salary breakup suggests performance commission, while the Pay Slip shows Ex Gratia. Please advise if this discrepancy will pose any hindrance in the future.

Thanks & Regards,
Sri