Can a company withhold your gratuity? Know your rights and actions when faced with it

WRITTEN BY DNA Web Team | Updated: Aug 23, 2023, 09:49 PM IST

Gratuity rights, Employee rights, Employee in a company, Company refuses gratuity, How can an employee get gratuity

If an employee's negligence or unethical actions cause a loss, the company can withhold gratuity.

An employee becomes eligible for gratuity after completing 5 years of service in a company. However, there are instances where companies deny gratuity, citing reasons. If faced with such a situation, it's essential to understand the legal aspects and actions to take.

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Grounds for Gratuity Withholding: Under the Gratuity Act, a company can withhold gratuity if an employee resigns after 5 years under certain conditions (4(6b)(ii)). This applies when an employee's negligence or unethical behavior causes company losses. The company must provide evidence and justification.

Show cause notice: If allegations arise, the company must issue a show cause notice to the employee. A thorough investigation and hearing both sides are necessary. If the allegations are proven, the company can withhold gratuity.

Partial gratuity withholding: Even if proven guilty, the company can't withhold the entire gratuity. According to the Gratuity Act and Delhi High Court orders, only the amount equivalent to the loss caused can be withheld.

Actions for unpaid gratuity: In case the company denies gratuity, a legal notice should be sent. If unresolved, file a complaint with the labor commissioner. The company would have to pay both the gratuity and interest, along with a penalty.