Ex-gratia

Ex-gratia means money paid by an organization beyond their obligations to an individual or group voluntarily without any legal or contractual entitlement. These payments are usually granted in exceptional circumstances or rather as an act of kind-heartedness and sympathy. Ex-gratia payments may be given in different cases, e.g., termination of employment, disputes related to customer service, compensation for damages, or humanitarian aid. Though not binding by law, ex-gratia payments can be use to maintain good faith, resolve disputes, and promote corporate social awareness.

Example of Ex-Gratia

For example, imagine a company, DEF Ltd. has to carry out restructuring and lay off some employees due to financial problems. Whereas the employees might be entitled to severance pay as per the agreed terms of their employment contracts, DEF Ltd opts to provide ex-gratia payments to help soften the blow for the laid-off employees. These ex-gratia payments given over and above the legally prescribed severance pay are dependent on variables such as the length of service, performance and personal circumstances. Through ex-gratia payments, DEF Ltd is able to show its empathy and appreciation of the employees' commitment and on top of it mitigate the negative consequences of the layoffs. By doing this, the business community is kept together, and morale also lifted among the workers who are still with the company.