What is ex gratia?

Posted on 28th Aug 2018 | 1030 views

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Ex gratia bonus is the sum of money paid by the organization to the employee other than the salary and allowances. Ex gratia bonus is a voluntary payment by the employer. The employer is under no obligation or liability to pay for ex gratia.

Ex gratia bonus

The payments of bonus act introduced the concept of bonus. A bonus is a payment linked to performance or productivity paid extra than salary and allowances. The government of India passed payments of bonus act in 1965. According to PBA, any establishment employing 20 or more employees is eligible to pay bonus.

What is ex gratia bonus?

Ex gratia bonusis an amount Paid by the employer to the employee regarding productivity or profits of the establishment.

Ex Gratiais a Latin term meaning good will, which is given voluntarily as a mark of compassion to the employees who are not covered under bonus Act. In most cases, ex gratia is paid along with an annual bonus. The payment bonus act put a ceiling of 20% bonus payable to the employee. Therefore, the employer came up with term ex gratia to pay along with bonus. Establishments like NGOs and hospitals and noon profit organizations provide their employees with ex gratia. There is no ceiling on payment of ex gratia but the difference in percentage may vary. Payment of ex gratia depends on the management.

Cases in which ex gratia bonus is paid

An employer may wish to pay ex gratia out of revenue as the acknowledgment of workers performance in case the profits do not support to pay bonus.

An employer may pay ex gratia in case specific period or task completed by the employee in the organization.

Ex gratia paid if the employer wishes to pay a maximum bonus of 20%.

Ex gratia is not part of annual CTC it not paid with the monthly salary or annual salary, payment time of the ex gratia is purely at the discretion of the employer.

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