Is an Employee Eligible for Gratuity During Suspension Before Dismissal?

An employee is suspended pending enquiry, and after 3 months, he was dismissed from service. During the period, he was paid a subsistence allowance. He has more than 5 years of service. The doubt is whether he is eligible for gratuity for the period of suspension?

Dear Senith,

Normally, the period spent on suspension pending inquiry by a delinquent employee has to be regularized when the disciplinary proceedings end up either in exoneration or any punishment other than dismissal. When the disciplinary proceedings end up in the suspended employee's dismissal, the period of suspension cannot be treated as qualifying service for gratuity.

As per the Gratuity Act, he is not eligible for considering the suspension period for gratuity purposes because it will not be treated as working days. However, the employer should take a positive approach. If this period of 3 months in that year counts for more than 6 months and adds one more year for gratuity payment, you may consider this as a special case without leaving room for another issue for a small cause.

Dear Senith, I would like to raise the following questions:

Is the employee who has completed 5 years of service before suspension pending enquiry?

Was there a fair domestic enquiry conducted?

If the employee is dismissed, what are the charges? Were they grave or not?

I would like to revert once all the queries are answered. Just to be specific, I would like to know these details.

With Regards, Manoj Tiwari

Suspension Period and Gratuity Eligibility

The suspension period is definitely not a qualifying service for Gratuity. It's a logical and equity-based point. For instance, if a delinquent employee is found engaged in illegal and objectionable activities while working on a specific date, his services may be suspended and later dismissed. This period is non-working, as the employer did not avail of his services. Therefore, you can legally forfeit gratuity under the provisions of the Act. Please refer to the misconduct and forfeiture clause laid down in the Payment of Gratuity Act.

Regards,
RDS Yadav
Labour Law Advisor

"Is the employee who has completed 5 years of service before suspension pending enquiry?"

Gratuity and Suspension Pending Enquiry

Suspension pending disciplinary proceedings ending in punishment would not be counted for gratuity. The gratuity of an employee, whose services have been terminated for any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.

Conditions for Forfeiture of Gratuity

The gratuity payable to an employee may be wholly or partially forfeited:
(i) if the services of such an employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such an employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of employment.

The above extract is from the Act pertaining to when gratuity can be stopped.

Dear Senith,

The very few facts revealed by you in your query do not help us to answer the query. The P G Act has a provision to forfeit the Gratuity if the employee is dismissed from service for certain reasons. However, the reasons for his dismissal have not been revealed by you. In case he is dismissed for reasons warranting forfeiture of Gratuity, there is no question of Gratuity for whatever period he is under suspension.

Therefore, I am unable to answer your query.

Suspension Period and Gratuity Eligibility

The question in the post is not about the forfeiture of gratuity for a dismissed employee, but rather whether the period of suspension pending inquiry prior to his dismissal can be considered for determining the length of his qualifying service for gratuity.

Dismissal from service is the maximum punishment, and the period of suspension pending inquiry into the charges, which form the basis of the punishment irrespective of its length, automatically merges with the dismissal. Therefore, consideration of the period of suspension pending inquiry, which is a part of the disciplinary proceedings, does not arise for the limited purpose of determining the length of the employee's qualifying service.

First of all, I would like to thank you for your valuable comments. Some points are also brought to you as invited. The delinquent employee had already completed 14 years of regular service at the time of dismissal. A fair and impartial domestic enquiry was conducted, and all the charges against him were proven. He had committed a series of misconducts such as disobeying and threatening the superiors, damaging the office records, and moreover, causing a financial loss of around Rs. 50,000 to the company.

I hope this information may help you provide more informed responses.

Thank you.

Regards,
Senith S.

Then he is not entitled to gratuity, as he was dismissed for causing willful loss to the company in terms of finances.