When an employment ceases, employer may make lump sum payment to the employee in accordance with the terms and conditions of the contract of service.
Lump sum payment may be described by the employer as compensation for loss an employment, ex-gratia, contractual payment, retrenchment payments, gratuity, etc.
The circumstances and nature of payment must be reviewed to determine the real character of the payment
The amount paid may consist to these two elements which are attributable to the loss of employment (compensation) and past services of the employee (gratuity).
Compensation includes the following:
Tax treatment of compensation:
If you need further clarification, please do not hesitate to contact our tax team.
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