How Should We Legally and Fairly Compensate a Long-Serving Casual Worker Retiring at 58?

Dear All,

We are a non-profit organization registered under the Societies Registration Act. We are involved in various activities such as sustainable development, and child and women's development, etc. We employ casual laborers in our projects who are given a monthly consolidated salary, a yearly bonus (equivalent to one month's salary), and no leave wages.

Now, one of our casual employees who worked as a gardener with us for about 4 years has now reached the age of 58. He wishes to leave his job due to his physical condition and based on his own decision. Our management intends to provide him with an ex gratia amount considering his loyal service.

Could you please advise on the amount we can give him and the basis for determining it? Additionally, what are the legal requirements we need to comply with regarding his appointment and retirement?

Thank you.

Few queries.

How many employees are there in your concern/organization? Are you covering EPF/ESI, etc.? Do you have any by-laws governing your body/organization? Is the casual employee in your organization governed by an appointment letter and relieving letter, etc.? However, a casual employee also needs to be paid all statutory benefits. Therefore, you can request your management to pay him a handsome amount of at least four months' salary (in lieu of gratuity/as ex-gratia).

Thank you for the reply.

There are about 100 employees working here in part-time, casual, and on rolls. We don't cover ESI but provide EPF to the employees on rolls. Regarding other statutory benefits, we will pay Diwali ex-gratia to people, and there is no concept of appointment and relieving letters for casual laborers.

Dear Jayarani,

If you have 100 employees and are not covering ESI, it is a non-compliance under the statute. What is the reason for not contributing to ESI? Please do it immediately. Ex-gratia in your workmen's case can be similar to the Gratuity Act payment.

Dear Jayarani,

As you are registered under the Societies Registration Act and employ approximately 100 people, the Payment of Gratuity Act 1972 would be applicable. Provided the gardener has worked for 4 years and six months or less, you need not pay him gratuity. However, if the appointment, even on a casual basis, exceeds 4 years and six months, gratuity is liable, where such appointment is continuous, and the employee has worked for at least 240 days in a year. Therefore, you will have to reckon such liability in other cases.

As regards ESI, it is applicable if your operations are in ESI-covered areas. As a social welfare agency, I presume the majority of your field staff would be in rural or semi-urban areas where there is no coverage of ESI. Please check. Since you are covering them under PF, there is no issue.

Regarding the gardener, you may consider paying 2.5 to three times the monthly salary in full and final settlement.

Thank you for the reply. Just want to know if there is any logic behind 2.5 to 3 months' salary and why not below or more.

Regards,
Jayarani J

Dear Jayarani,

The logic in 2.5 to 3 months' salary is to consider an amount equivalent to gratuity (salary X 2.5), even though it is not a legal liability. When you are gracious enough to give him something extra, it has to be substantial.

Thank you.