Can Employees Earning Over 10,000 Claim Ex Gratia After Leaving a Job?

I am aware that an employee who leaves a firm is eligible for a bonus if he has completed the requisite working days in any financial year. What about an employee who is being paid ex gratia as his salary is beyond 10,000/-?

1. Can he claim ex-gratia when he leaves the firm after working for more than 30 days in a financial period?
2. Will he be paid ex-gratia as per his last drawn salary?

Regards,

As discussed earlier, ex-gratia is a sum of money paid out of kindness and voluntarily. There is no obligation or compulsion to pay; hence, there is no liability on the employer to pay ex-gratia, and neither can the employee claim it.

Apart from the legality, if the employer would like to pay ex-gratia, they can, and it would be accounted for in the books of accounts. There is no due diligence for ex-gratia as such.

Thank you, Mr. Saji, for your prompt response. The only doubt I have is regarding an employee whose salary was ₹40,000/-. He left the firm to go abroad. However, he returned after 6 months and rejoined the same company around Diwali.

We treated him as a new employee and gave him a festival bonus applicable to new joiners of the company. However, he is claiming a bonus for the period when he was previously working with the company. He worked from April 12 to February 13, which is 11 months in the financial year 2012-13. Since his salary was beyond the bonus limit, is he eligible for a bonus? Can he claim ex-gratia in this regard?

Ex Gratia Claims and Employer Obligations

In legal terms, no, he cannot claim ex gratia. Prior to that, I would like to know if the employer gave any commitment through the appointment letter that he would be paid ex gratia. If so, the employer has to; if not, then there is no need to give.

As I mentioned earlier, if the employer would like to compensate for the 11 months he worked for ex gratia, then no one can stop the employer. However, there is no compulsion.

Legally speaking, a person drawing an ex-gratia amount beyond Rs 10,000 per month is not entitled to receive a bonus under the Bonus Act. Salary or wages include dearness allowance but no other allowances, for example, house rent, incentive, or commission. Bonus is paid to those employees whose salary/wages do not exceed Rs 10,000 per month (only basic & DA), provided they have worked at least 30 working days in a financial year of the company. The time limit for payment of Bonus is within 8 months from the close of the accounting year of the company.

Thanks & Regards,

As my fellow friends have already stated, under the Bonus Act, an employee with a gross salary of more than 10,000 per month cannot claim any bonus. However, giving a bonus to employees with a gross salary of more than 10,000 per month is solely at the discretion of the company.

In your case, legally, the mentioned employee cannot claim the bonus even when he had left the organization. Now that he has rejoined, he will be treated as a new hire, so there is no basis for him to claim a bonus for his previous employment with your company. I have encountered similar situations when rehiring former employees who wanted settlements from their past employment. In such cases, it's important to counsel these employees and clarify the concepts of resignation and new employment.

Thank you.

Hi all,

If the payout of Ex-Gratia is decided as of September in a financial year, I would like to know if Ex-gratia is paid on a pro-rata basis to an employee who leaves in the middle of the financial year.

Dear CuriousBee,

Ex Gratia is paid voluntarily, out of kindness or grace. There is no legal obligation; hence, it depends on the employer. If an employee works for 3-4 months, he/she will not be entitled to Ex Gratia for the entire year; it will be on a pro rata basis only. Also, read the terms of the appointment regarding Ex Gratia Payment to have a clear idea.