Employee Resignation After Transfer Extension: Can We Withhold Gratuity for Negligence?

Employee Transfer and Gratuity Payment

If an employee is transferred to another site due to the completion of the existing site, and he initially agrees but asks for a one-month extension due to a family problem, what should be done if he resigns after the extension? The company granted him the extension, but after one month, he abruptly resigned from his job. He had served the company for nearly six years and is now asking for gratuity payment. Due to his failure to join the transferred site, the client has penalized the company for not deputing staff on the stipulated time. In this case, can we hold his gratuity amount due to negligence of his duties?

Section 4(6) of the Payment of Gratuity Act 1972

Section 4(6) of the Payment of Gratuity Act 1972 reads as follows:

(6) Notwithstanding anything contained in sub-section (i),-

(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. The gratuity to be paid to an employee can be forfeited for causing loss to the employer subject to the following conditions:

1. The employee has to be terminated from service for negligence, causing loss to the employer. If the services are coming to an end on account of acceptance of resignation, then this condition is not met.

2. The forfeiture shall be to the extent of loss.

3. Following the termination of service due to negligence of duty, a show cause notice has to be issued as to why the loss caused to the employer should not be recovered from the gratuity.

4. The explanation of the employee has to be considered, and a reasoned order has to be passed.

Mr. KK!HR has well explained the conditions under which gratuity can be forfeited and how it is processed.

If we compare your scenario to the wording, it is not reflected anywhere that his negligence is causing a loss to the employer. Here, the company suffered a loss equivalent to one month of his wages, but that cannot be determined as his negligence. It is due to the company granting his extension (which comes under service conditions).

He is free to decide where he will work. You can just check if he is not willing to serve the notice period, then he may be required to choose the "Notice Buyout" option.

Penalty and Employee Responsibility

The penalty imposed by the client cannot be put on the employee. If the employee was given an extension or permission to stay back, naturally, the company should have sent somebody else to the client site. The client is not at all concerned about who is being deployed unless specifically agreed upon. Therefore, the loss caused cannot be attributed to the employee concerned.

Gratuity Forfeiture Conditions

Moreover, gratuity can be withheld only when you have dismissed the employee for such gross negligence proved in an inquiry. In the absence of an inquiry and subsequent dismissal, the question of forfeiture of gratuity does not arise.