Can an Employer Withhold Gratuity Payments? Let's Discuss Your Rights and Options

Can an employer withhold the payment of gratuity?

Forfeiture of Gratuity under the Payment of Gratuity Act 1972

Section 4(6) in the Payment of Gratuity Act 1972 provides for the forfeiture of gratuity as follows:

(a) 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.

(b) The gratuity payable to an employee may be wholly or partially forfeited:

(i) if the services of such 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 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 his employment.

Before forfeiture, the employer has to issue a show-cause notice stating why the gratuity shall not be forfeited. In consideration of the reply, a speaking order shall be issued.

If you have not received any show cause notice for the forfeiture of gratuity, you may ask HR. If no reply is received, file a petition with the appropriate authority for a claim.

As correctly stated by KKHR, gratuity can only be withheld in the case of termination, as mentioned in Section 4 of the Payment of Gratuity Act, 1972.

With due respect to adding KK HR statement under the Code on Wages 2020, the following should be included for the forfeiture of gratuity:

Sexual harassment which means the 'sexual harassment' as defined in clause (n) of section 2 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (14 of 2013) and includes the circumstances specified in sub-section (2) of section 3 of the said Act.

Regards, Suresh

Forfeiture of Gratuity by Employer

The right to forfeit the gratuity of an employee by the employer is not absolute but only applicable when the employee has been dismissed for misconduct as specified in section 4(6) of the Payment of Gratuity Act. Even in such cases, forfeiture can only occur after giving the concerned employee an opportunity by issuing a show-cause notice.

Thanks & Regards,
Sumit Kumar Saxena