Can We Deduct Notice Pay from an Employee's Gratuity After Immediate Resignation?

One of our employees has submitted his resignation letter and been relieved immediately after receiving his salary. The employee is entitled to Gratuity. Is it possible, as per the act, to recover those amounts from the Gratuity payable amount? Please advise on this issue.

Regards,
Janakiraman

I hope any company pays a salary for the past worked month. At the first point, you pay for the worked period, am I correct? (If you have any contract bond, that case is different.)

PF & Gratuity

These are the amounts which an employee saves at the employer's behest (as per Statutory Gratuity, it will also be considered as social security savings). So, you have to pay all these to him as per statutory norms. However, many companies still stop PF & Gratuity of employees for very silly reasons. The less knowledgeable ex-employees make rounds or else they come to your doorstep, but if any knowledgeable person or anyone with power can proceed against you legally. Finally, you cannot recover any amount from the employee's Gratuity legally (if, by any chance, any big legal case happens in front of the court of law and the court passes any sentence)... there are so many illegal moves which everyone knows.

No, gratuity cannot be forfeited or withheld for reasons like this. No amount due from the employee shall be deducted from the gratuity amount. Gratuity can be forfeited only for very specific reasons as mentioned in section 4(6)(b) of the Payment of Gratuity Act, which includes instances of an employee being dismissed for offenses involving moral turpitude or causing damage to the company by his riotous behavior. Non-payment of notice pay is not considered major misconduct as far as the law is concerned.

Regards,
Madhu.T.K

Legally, as stated by Mr. Madhu, notice pay cannot be recovered from gratuity payable as per the POG Act.

Varughese Mathew

Recovery of Notice Period Amount from Gratuity

Recovery of the notice period amount cannot be done from the amount of Gratuity; the company may face legal issues from the side of the employee.

Regards,
Rajesh

Employer's Obligation on PF and Gratuity

PF and gratuity are the savings of the workman, so the employer can't hold these. Recently, the PF Commissioner assured that if an employer does not sign the PF withdrawal form, the workman can submit it without the employer's signature.

Finally, the employer can't hold the gratuity and PF amount.

Regards,
Vk. Sood

Yes, I agree with all of you, i.e., no one can make any recovery from employees' PF or Gratuity accounts once they have left. However, there are many other smooth ways you can consider. For instance, you can ask the departing employees to either pay their notice period and follow the company's exit process to collect all their final dues, or you may withhold their final settlement. It is advisable to inform them about this verbally.

Additionally, you can seek assistance from your legal department.

Regards,
Sndeepkumar Kale. Asst. Manager (HR)

No, we can't deduct NP from gratuity as deductions can only be made after gross misconduct or misappropriation.

Regards,
Shyamal

Recovery of Dues from Gratuity

An employer can recover notice pay, any advance paid to employees, or any other legal dues from the gratuity amount payable to an employee. Here, the employer is not reducing or making the employee forfeit the gratuity. The employer just makes an accounting entry. As long as there is a clause for notice pay, the employee is liable to make payment. This is the money payable by the employee. Once he completes five years, gratuity is payable to him. The employer has a right to deduct the dues payable by the employee from the gratuity.

Assume there are some arrears outstanding. The employee has requested a gratuity advance with consent. The employee intends to use this gratuity advance to clear the arrears. When it comes time to pay out the gratuity, the question arises: can we deduct the amount previously taken as a gratuity advance and then pay out the remainder of the gratuity amount?

Please advise.

It is better not to make it official. Therefore, in the gratuity payment order (in Form L sent to the employee), you should show the full amount as payable and separately deduct the amount paid as gratuity advance as a general advance. Do not show it as a gratuity advance but just as an advance or general advance, which can obviously be deducted from the full and final payment due to the employee.

Madhu.T.K