Compensation Pension [Rule 33, Part III]
- When a permanent post is abolished, the person selected to be discharged will be given two options; 
- to leave the service accepting pension benefits based on qualifying service so far earned by the individual.[33(a)]
- either to accept another employment in Government service [33(b)]
- The pension granted as opted by the person, is called compensation pension.
- No pension is admissible to an employee for the loss of an appointment on discharge after the completion of a specified term of service.
- No pension may be awarded for the loss of a compensatory allowance or special pay.
- Reasonable notice should be given to an employee in permanent employment before his services are dispensed with on the abolition of his office. If in any case notice of at least three months is not given, and the employee has not been provided with other employment on the date on which his services are dispensed with, then with the sanction of Government a gratuity not exceeding his emoluments for the period by which the notice actually given to him falls short of three months, may be paid to him, in addition to the pension to which he may be entitled under Rules 64 to 70 but the pension shall not be payable for the period in respect of which he received a gratuity in lieu of notice 
- Rules requiring the refund of the compensation gratuity on re-employment, apply to a gratuity awarded under rule 40, if the employee is permanently re-employed within three months from the date of notice. But the employee need not refund that proportion of his gratuity under this rule, which the interval of his non-employment bears to the whole period for which the gratuity is given. If the employee is re-employed only temporarily he need refund no part of his gratuity but if such temporary employment is foreseen, the gratuity should be proportionately reduced.
Kerala Service Rule Vol.II 6 th Edition