Are Suspended Employees Entitled to Bonuses and Other Benefits During Suspension?

Kindly confirm whether the suspended employee is eligible for the benefits mentioned below, apart from the payment of subsistence allowance, during the suspension period:

1. Bonus
2. Ex gratia
3. Earned Leave Accrual
4. Gratuity

Thank you.

Eligibility for Benefits During Suspension

The eligibility for benefits other than the subsistence allowance depends upon the conditions under which the suspension is revoked. If the charges are proved against the employee, the management will decide whether to terminate him by paying the benefits or to dismiss him without paying any benefits. In the case of termination simpliciter or discharge, the employee will be paid all benefits available as if he had not been under suspension.

On the other hand, if the misconduct for which the employee was suspended was very grave, such as moral turpitude, violence at the workplace, etc., and based on the inquiry there was no punishment lesser than dismissal, then the entire benefits will be forfeited. Section 4(6)(b) of the Payment of Gratuity Act also allows forfeiture of gratuity on the grounds of misconduct involving moral turpitude and similar offenses.

In either case, during the period of suspension, an employee is eligible only for a subsistence allowance of 50% of salary for the first 90 days of suspension and 75% for the remaining days if the suspension continues beyond 90 days.

If the employee is exonerated, then obviously he will receive all benefits, including the difference between the actual salary and the subsistence pay given. For this, he also has to wait until the inquiry is over.

Regards,
Madhu.T.K

Thank you for your valuable reply. In our case, the suspension has exceeded 180 days, and we are providing a subsistence allowance of 90% of the salary. The inquiry is being delayed due to various reasons. Consequently, we are uncertain about when the inquiry will be concluded.

Provisions in Financial Books

Our concern pertains to whether we are required to make provisions in our books for Bonus, Ex-gratia, Gratuity, and Earned Leave (EL). The Accounts department is eager to close the books for the year 2012, hence they are urging us to make the necessary provisions.

Earned Leave Allocation for 2013

Additionally, when we allocate Earned Leave for the year 2013, should we allot the EL balance to suspended employees solely for the days worked during the year, or should it include the suspended days?

Bonus Payment for 2012

Regarding the Bonus for the year 2012, scheduled for payment in February 2012, should we pay suspended employees solely for the days worked during the year, or should it include the suspended days?

Your confirmation on these matters would be greatly appreciated.

Best regards,
Srinivasan

Since the employee has not been found guilty but is only under suspension, it is always advisable to create provisions for all the benefits, including salary and allowances. In the books of accounts, it is only provisions, and it is always desirable to create provisions in such doubtful cases.

Payment of Bonus

With regard to the payment of bonus, you can also create a provision and pay a bonus for the actual days worked. Though the suspension period is to be taken as days worked for the purpose of payment of bonus, the same can be withheld until a decision is made.

Earned Leave (EL) During Suspension

During the period of suspension, the question of availing of EL will not arise, and therefore, you need not credit EL for the days. Subsequently, when he is exonerated, you can grant it later. Anyway, the question of encashment of EL shall be addressed only when a final decision is made about his discharge, dismissal, or exoneration. Therefore, nothing needs to be done with all these benefits now, but just create a provision for all these benefits and allowances.

Regards,
Madhu.T.K

As mentioned by Madhu T.K., please make provisions for all the required statutory requirements since the inquiry is being delayed by the inquiry team and is not the fault of the suspended employee. If, at all, the suspended employee is found to be guilty, the provisions can always be reversed.

No, there is no limitation period for inquiry. The inquiry will take its own time, and that is why the Standing Order Act and/or the State's Subsistence Allowance Acts have provided for the payment of subsistence allowance based on the length of suspension. In the Kerala Payment of Subsistence Allowance Act, there is a provision to pay 100% wages if the suspension continues after 180 days.

Regards,
Madhu.T.K