How Should I Handle a Fair Settlement for a Terminated Employee with Deducted Ex-Gratia?

Dear All,

I have a query. I am working in a private company as an assistant HR. Our director has terminated an employee without a valid reason, and the company is deducting 10% of her CTC as her ex-gratia amount. Now, she wants her full and final settlement. I had a discussion with my director, and he told me that we will not give her the ex-gratia amount. She wants me to make a fair decision on what we can do in this situation.

Kindly reply ASAP.

Thanks & Regards,

Gitika

Dear Gitika, You have written that "the company is taking her ex-gratia amount, 10% of her CTC." Has the company taken this amount as a one-time measure, or has it been deducting 10% of the CTC each month? Is this deduction mentioned in the employee's appointment letter?

As an Assistant HR Manager, you are a representative of your management. Therefore, it is your duty to communicate their point of view to the employee. However, while doing so, do not just become a communicator.

In the meantime, if you feel that the deduction is illegal, inform your management of how it is illegal. Apart from the legality of the decision, you may inform them that if other staff members perceive this deduction as unfair, it will impact the organization's culture. It will destroy the environment of trust, which is very important for any company. However, whether to convey this will depend on the Managing Director's personality. Many of them are headstrong and do not wish to listen to anything from subordinates.

Lastly, if you have evidence that shows the deduction is illegal, you may pass on an informal message to the employee about approaching the labor office of the local area to solve the problem. However, do not convey this over the telephone but in private. Ensure that the employee is not recording your conversation.

Thanks,

Dinesh Divekar

Understanding Ex-Gratia Payments

The term "Ex-gratia" itself suggests that it is not a part of one's salary and is paid over and above the salary. However, if it is mentioned in the Letter of Appointment, you need to confirm first if this payment is subject to the fulfillment of certain conditions. In case such a condition is found in the Letter of Appointment, the payment of the same would be at the clear discretion of the Management, and your MD can always deny payment of Ex-gratia on the plea of "non-fulfillment" of such payment condition.

But if there is no such clause in the Letter, and if the employee is drawing it through the payslip regularly, it has already been proved that "Ex-gratia" is a part of her salary, and the denial of payment of Ex-gratia would lead to legal complications. And while I say so, mind you that Labour Court Judgements are always Pro-Labour.

Regards,