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Thursday, 26 December 2013

Closure of branch / undertaking. Whether ex-gratis to be given or retrenchment compensation ?

Can we call it “Gratuity” and pay the same from the Gratuity fund or from other funds of the company?
    The employees eligible for Gratuity can be paid through Gratuity fund, else as”ex-gratis” from other reserves and surplus funds.

Can we call it “Ex-gratia” pay-out though we are intending to pay the Gratuity amount?
    You may call “Ex-gratia” pay out as a gratitude to those employees who have not completed FIVE continuous years of Service as required under provisions of Payment of Gratuity Act, 1970.
Can we use a neutral work such as “Special Allowance” instead of “Ex-gratia”?
 Kindly refrain from using terms as “Special Allowance” as they might affect PF eligibility and calculations.

 Kindly note that as per Industrial Disputes Act, 1947; Where less than 50 workmen are employed or have been employed on an average per working day in the preceding 12 month, in case of intention of closure of the undertaking, serve notice on the appropriate government at least 60 days before the date on which intended closure is to become effective, stating clearly, the reasons for closure. 

Also note that where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking shall be entitled to notice period and compensation as per Section 25-F as if the worker had been retrenched. If the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, compensation to a workman shall not exceed the workman's average pay for three months. 

Now, you need to clarify that whether it is a closure and thats why you are terminating the employees or it is some other reasons. Kindly note that you should not be in a position where one had as a gratitude you pay out as “ex-gratis” and on the other hand similar amount you payout as retrenchment compensation.