Can an Employee Partially Withdraw Gratuity for Personal Needs? Seeking Advice from HR Peers

Hello Everyone, I have a question and want to understand if we can do this or not.

Employee Gratuity Withdrawal Request

I have a loyal employee who has been with us for a very long time. He has some issues at his place, and now he is requesting money. However, he doesn't want an advance from the company; he wants to withdraw his gratuity partially.

As I know, gratuity cannot be withdrawn partially, but he is requesting the same and is not ready to understand as he has completed more than 8 years at the company.

Hi, it is not possible to withdraw gratuity partially while in service.

The company may consider releasing some loan amount to the employee if he is willing, or the employee can submit a resignation and get relieved to claim gratuity. They can then rejoin after a break if feasible for both the employee and employer. In this case, the employee's service continuity will be affected. Another option is to advise the employee to apply for a PF loan.

Payment of Gratuity

Payment of gratuity, partly or fully, is never possible while an employee is still in service. As you know, gratuity is one of the few final settlement payments an employee is entitled to.

Alternative Solutions for Employee Financial Assistance

If you really wish to help a loyal employee, a practical solution is to organize a 'personal loan' from your banker with whom the salary payments are channeled. If necessary, your office can sign as a surety for the personal loan.

Another possibility is, subject to eligibility, part leave encashment. If under the ESI scheme, in ESIC, the encashment of earned leave is allowed to the extent of fifteen days every year along with the condition that at the time of availing encashment, the individual should also avail earned leave to the extent of fifteen days.

Can you please elaborate on your statement: "If under the ESI scheme, in ESIC, the encashment of earned leave is allowed to the extent of fifteen days every year along with the condition that at the time of availing encashment, the individual should also avail E.L. to the extent of fifteen days"?

Has a company's leave encashment anything to do with ESI? How can encashment and availing take place at the same time?

Gratuity Withdrawal and Adjustment

There is no partial withdrawal or advance payment of gratuity. An employer is not in a position to adjust any loan paid to an employee from the gratuity amount at the time of retirement. Gratuity can be adjusted, withheld, or forfeited only in such circumstances as mentioned in section 4(6) of the Payment of Gratuity Act.

Gratuity Withdrawal Options

It is not possible to withdraw the gratuity amount in the middle of the service. If the company is considering, they may give it as a loan to the employee for up to 70% of the gratuity amount. The loan amount will be recovered from the employee's salary.

Employer's Discretion

In another case, it depends upon the employer. If an employee is loyal and valued by the company, the employer can consider giving 50% of his gratuity (as a moral gesture and depending on the situation).

Regards, R. Sateesh, MHRM, LLB

Hi, accrued gratuity amount cannot be used as a scale to decide the employer's loan amount to the employee. The employer is subject to the rules and regulations of the establishment. The loan policy, if any, may consider supporting by releasing some loan amount. However, that has nothing to do with the gratuity amount.

[Link to the article: https://timesofindia.indiatimes.com/city/bengaluru/gratuity-cannot-be-adjusted-towards-loan-account-karnataka-hc/articleshow/95240154.cms]

Dear HR-Indiform,

I think your problem is more about communication and relationship management rather than a legal issue. Someone may have informed this employee that they can receive partial gratuity or take out a loan against it, and he has believed this information. It is possible that the individual meant (or even explicitly said) PF Withdrawal.

Your task now is to convince him that legally, this action is not permitted, and therefore, he has the option of taking a loan or withdrawing a part of his PF. Beyond that, there is little else to do. Of course, other members have provided various suggestions above, one of which is to allow him to resign and then rehire him after a month's break.

Yes, Mr. Saswata Bannerjee,

In the absence of a clear copy of the notification in this regard, it's better to avoid any suggestions based on unclear sources. For now, we shall abide by the provisions of the act.

Thanks and regards,