Dear Saravanan Ji,
Gratuity is payable only when an employee's services are permanently terminated due to resignation, retrenchment, incapacity due to accidental injury, death etc. While gratuity is payable after completion of 5 year service continuously, this condition of 5 year continuous service is not applicable if the employee dies while in service. Gratuity is payable in the event of death even if he has not completed five year service. For preparing gratuity policy for your firm, you may please study similar policies of public sector undertakings like Food Corporation of India, nationalized banks, co-operative banks etc. They have established policies. You may adopt them with suitable changes. Some employers now resort to gratuity policies of Life Insurance Corporation of India. They pay periodical premium to the LIC. When gratuity becomes payable to some employee, the LIC meets the liability. You may contact nearest LIC office and get more details from them.
Thanks & regards,
18th February 2012 From India, Pune