Understanding Ex-Gratia and Dearness Allowance: Should They Be Paid Annually?

Dear All,

Should ex-gratia be paid for every financial year along with a bonus? Can anyone tell me the meaning of DEARNESS ALLOWANCE?

Thanks,
Uma

Dear Ex-gratia is a discretionary payment. Normally, it is used to make it part of a bonus. Please do not confuse it with a bonus. Dearness allowance is a floating allowance dependent upon the Consumer Price Index.

With Regards,

V. Sounder Rajan

Hi Uma,

As rightly mentioned by Mr. Sounder, ex gratia is not mandatory. It is purely at the discretion of the management to pay ex gratia. Normally, when an amount is paid to employees who are not covered under the Payment of Bonus Act and when some amount is given in excess of the ceiling prescribed under the Act (bonus earnings restricted to Rs. 3500 per month), it will be termed as ex gratia in the bilateral/tripartite settlements. Usually, ex gratia is the amount paid to employees in recognition of their cooperation and contribution. Employees have no right to demand ex gratia unless it is contemplated in a settlement between the employer and employee.

Minimum wages have two components: 1) basic wages and 2) dearness allowance. Dearness Allowance prescribed under the Minimum Wages Act will be revised every 6 months based on the increase in the cost of living index.

Companies pay Dearness Allowance to employees based on the long-term wage settlements they enter into with the unions.

Like basic wages, dearness allowance will also be taken into consideration for indirect benefits such as bonus, PF, gratuity, superannuation, etc.

Please revert to me for any clarification.

Have a wonderful day and a great week ahead.

Thanks & Regards,

Kalyan R

Manager - Personnel

Sundaram-Clayton Ltd

Brakes Division

Chennai.

Mobile: 9840942232

Hi,

I am having one confusion regarding ex-gratia. If a person is leaving an organization, can the company consider the ex-gratia amount as a recovery from the employee and take it back at the time of the employee's full and final settlement?

Good day,
Karuna Kerni

Dear Friends,

Thanks for your informative responses. Would it be fine if someone could help me out in understanding Ex-Gratia? When does it have to be paid? How much percentage is usually given? Is it a fixed pay or variable pay?

Thanks,
Vidhya