“Ex Gratia Payment”

Introduction to Ex Gratia Payments?

Ex gratia payments are “non-contractual payments outside of employment contracts or legislation”1 made by an employer to an employee on an individual basis. They are generally regarded as voluntary payments to employees due to exceptional circumstances such as redundancy, dismissal, or disability. Ex gratia payments are usually made in addition to usual contractual entitlements and statutory benefits, and should meet the criteria of being reasonable, impartial, and fair while recognizing the circumstances of the individual employee.

Factors Influencing Ex Gratia Payments

Ex gratia payments are usually offered after due diligence and careful consideration of relevant factors. It is important to note that the decision to make an ex gratia payment rests entirely with the employer and any payment should not be viewed as an obligation. This may be influenced by the nature of the case, the employee’s prior service in the organization, the reasons for the individual’s departure, the bargaining power of the parties involved, and the availability of justification for making the payments.

Purpose and Scenarios for Ex Gratia Payments?

Ex gratia payments are often used to settle disputes or conflict between employers and employees. They are sometimes offered to employees who have been wrongfully dismissed, or requested by employees in response to a breach of contract or statutory entitlement. Ex gratia payments may also be used to reward employees for excellence in their duties.

FAQs

What is the main difference between ex gratia payments and regular salary?

Ex gratia payments are voluntary payments made by an employer to an employee on an individual basis which are not a contractual or statutory entitlement. These are quite distinct from regular salary or statutory benefits which are wages or benefits given to employees as part of their employment contract.

Are there legal regulations that govern the amount or frequency of ex gratia payments that employers can offer?

Ex gratia payments are generally voluntary and as such, there are no specific legal regulations that govern the amount or frequency of ex gratia payments an employer can offer. However, there are statutory entitlements that come with employment contracts that should be respected when navigating ex gratia payments.

How do ex-gratia payment rules ensure fairness and consistency in their distribution among employees?

When employers make ex gratia payments, they must take into account the individual circumstances of each employee they are offering payments to and ensure that the payments are reasonable, impartial, and fair. Companies must also demonstrate that their decisions do not discriminate against any particular group of employees lead to Impartial payment, or any employees with protected characteristics such as race, gender or disability. Adopting payment policies and rules that are regularly reviewed and updated is one way organizations can ensure fairness and consistency in the distribution of ex gratia payments among their employees.

Also See: Variable Pay