Can Employers Halt PF and ESI Payments After Firing for Misconduct? Seeking Advice

Dear All,

As an employer, can we stop the PF, ESI, etc., disbursal of an employee if they are fired from the company due to serious misconduct or a violation of the terms of appointment? If yes, please suggest the way to do it.

Dear,

First, I would like to tell you that as you said, "Is it explained in your standing order about serious misconduct which he had done? Have you done the domestic enquiry on the base of the principle of natural justice?"

If you had followed all legal procedures and he was awarded a punishment, then you can terminate him. On the other hand, you cannot stop his PF amount, and ESI will stop automatically once he is terminated from services.

Protection of PF and Gratuity Funds

PF and gratuity are protected funds. The employer has no right to them, and even courts cannot attach them. Gratuity payment can be denied or withheld in case of serious misconduct involving fraud. This can only happen if the court's order (or, at least, the outcome of a domestic enquiry) specifies it as part of the punishment.

Untouchability of PF

PF is untouchable. The employee will receive it regardless of the circumstances.

ESIC Benefits After Employment

ESIC benefits cease at the end of employment. However, ongoing treatment will continue until completed. Again, interference with this process is not permitted.

Dear Sunny Dudhani,

PF and ESI are social securities. There are specified deductions from the employee's salary each month, and there are specified contributions from the employer's side. Therefore, it would be incorrect to use the word "disbursal." The meaning of the word "disburse" is "Expend, as from a fund." You are not spending anything from the fund.

Contributions and Deductions

These are applicable as long as the employee is on the rolls of the company. If the employee is not on the roll of the company, due to termination or resignation, then where is the question of deduction arising?

You can deduct the PF/ESI contributions until the employee's last working day. Thereafter, your liability ceases.

Thanks,
Dinesh Divekar