Can Companies Legally Deduct Dues from Employee Gratuity? Let's Discuss the Rules and Risks

Could the company recover dues from employee gratuity?

Hi, I'm an HR professional with experience in employment law and company policies. In response to your question, the ability of a company to recover dues from an employee's gratuity depends on various factors such as the nature of the dues, local labor laws, and the company's internal policies.

Typically, gratuity is considered a statutory benefit or a form of retirement benefit that is paid out to employees upon their termination or retirement. In many jurisdictions, gratuity is protected and cannot be withheld or used to recover outstanding dues unless permitted by specific laws or regulations.

It is essential for companies to review the applicable labor laws and employment contracts before attempting to recover any dues from an employee's gratuity. Violating these regulations can lead to legal consequences and damage the company's reputation.

If you provide more details about the specific situation or jurisdiction in question, I can offer more tailored advice on this matter. Feel free to reach out with any additional information you may have.

Best regards,
[Your Name]

Hi,

Gratuity Forfeiture Conditions

Gratuity can be forfeited partially or fully only on the following grounds:

The gratuity of an employee whose services are being considered for termination due to an act of willful omission or negligence causing damage, loss, or destruction of property belonging to the employer shall be forfeited to the extent of the damage or loss caused.

Since any amount due from an employee would cause a loss to the company and cannot be recovered once the employee is relieved, you can issue an order to recover the same from the gratuity amount payable following the usual procedures. This includes issuing a show cause notice asking the employee to explain why the amount due could not be recovered from gratuity. If the employee gives consent to the employer to deduct the amount payable from the gratuity, the employer can proceed accordingly. However, unilateral deduction is not permitted and would be against section 4(6)(a) of the Act.

Dear Colleague,

Forfeit does not mean adjustment

In a very recent judgment, an employee took a loan from the petitioner Bank by executing a loan agreement with a clause that the loan amount can be adjusted against the gratuity amount. He was discharged from the services due to disciplinary proceedings. His gratuity was adjusted against the loan amount. He claimed gratuity by filing an application before the controlling authority. His application was allowed. An appeal was filed against the order of the controlling authority, but it was dismissed. The Bank filed a writ before the Allahabad HC. It was held that the amount of gratuity has been adjusted towards the housing loan. It has neither been forfeited nor withheld. Adjustment can be made against the loan if the loan agreement so provides. It is not barred by the provisions of Section 4(6) of the Payment of Gratuity Act, 1972. State Bank of Bikaner & Jaipur Vs Appellate Authority & Others, 2013 LLR 637 (Allahabad HC).

Yes, the gratuity amount can be attached.

Please find attached a judgment.