Kannanmv
Hr & Administration
Pragnaa HR Compliance Services
Pragnaa Shree Venture India Pvt. Ltd
RAMU-HR
Deputy Manager-hr
Korgaonkar K A
Ba,llb,mpm,dir&pm,dll&lw,d.cyber
Raviatreya
Commercial
Syed.active@gmail.com
Hospitality Industry
+6 Others

Thread Started by #RAMU-HR

Respected seniors
This is Ramu, Working as a Jr.Manager-HR in a Private Manufacturing organisation at Vijayawada. I have query on gratuity payment. Recently one of our employee met with an road accident while attending the duties and died on the spot. He served the company just 4 months only. Is he eligible for gratuity under death case even though he has less than one year service.
I requested the seniors kindly give your suggesstion
With regards
Ramu
4th January 2013 From India, Vijayawada
Hi Ramu,
Would like to quote the section 4 of the Payment of Gratuity Act, 1972.
4. Payment of Gratuity - (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease;
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement;
Hope, it will be cleared now...
4th January 2013 From India, Chennai
Hi Ramu
As per the provisions contained in Payment of Gratuity Act 1972, the gratuity is payable for the services rendered only. How ever contineous five years service is not necessary in case of Death. Here in your case, you legally not required to pay gratuity as the person under reference has rendered only 4 months service. However service period of 6 month or more is considered as one full year while calculating gratuity, you assume as he has rendered one year service & pay the gratuity as good gesture. If you have made Gratuity trust with L I C of India then the Insurance company will calculate his gratuity as if he has rendered services up to 58 years of age. For this you have to inform to Insurance co with certain documents. -SDP.,
4th January 2013 From India, Kolhapur
Dear SDP,

In my opinion the Gratuity paid by LIC is also based on provisions of the Gratuity act and the agreement entered between LIC and the employer. The employer submits the list of employees with their date of joining and based on this data LIC does an actuarial valuation and intimates the employer the fund that needs to be maintained in the trust. Any shortfall in the fund has to be made good by the employer. LIC makes the Gratuity payment to the extent of the fund available against the employer's contribution to the fund. LIC collects a risk premium on the fund payable by the employer and based on this only LIC pays the gratuity as if the employee has rendered service till his 58 years in case the employee dies whilst in service with the employer. Moreover, LIC processes the claim only based on a request from the employer and in this case the employer may not be in a position to submit the claim owing to the fact that he is not eligible as per provisions of the Gratuity Act.

In this case I feel LIC may not entertain because he has not fulfilled the conditions laid down under the Gratuity act for eligibility. However, if the employee is covered under PF act, he can approach PF under the Employees Deposit Linked Insurance (EDLI). Alternatively if the employer has obtained an exemption from PF and holds the liablity with LIC of India then LIC ,may process the claim through the employer.

M.V.Kannan
5th January 2013 From India, Madras
Dear SDP.
You are getting good res. on your query, its good all are supportive on this site.
Please first check the employees was a permanent employee of your organisation. If he was a permanent employee, then you will have to pay his gratuity upto the age of 58 years.
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement;
5th January 2013 From India, Mumbai
Dear Ramu,
This case doesn't fall under the eligible category of GRATUITY, whether temporary or permanent. The eligibility of Gratuity starts after completion of 5 years of complete service.
Regards
Biplab
5th January 2013 From India, Delhi
Dear Ramu HR,

I appreciate the reply of Pragnaa HRCS and Shri. S D Patil and suggest you and other members of this forum to recommend the LIC Gratuity Scheme to their management. This scheme takes care of your Gratuity liability out of the corpus managed by it on your behalf.

The corpus is managed by LIC from the amount you contribute towards this scheme. This contribution is work out the actuaries on behalf of LIC on the basis of data provided by you in respect of your employees, on basis of various parameters.

Total corpus comprising of amount contributed by you and interest credited by LIC is available for claim settlement. LIC has been offering very competitive and consistent interest rates over the years. For the year 2009-10, LIC has offered 9.00% to 9.65% depending on fund size. The interest declared is net of administrative expenses incurred, hence no separate charges are charged after crediting the interest.

Just think over, where you get interest of 9.00% to 9.65% and that too with tax benefit?

There is a very important salient feature in this Gratuity Scheme with LIC which provides for insurance coverage to the employees to the tune of future service gratuity with nominal extra premium for this.

Dear Ramu HR, if you would have contributed for this scheme, definitely you would have got number of blessings from the family members of deceased employee and also from other employees of you.
5th January 2013 From India, Mumbai
Dear Ramu HR,
I wish to add further that similar scheme is available with other insurance companies also.
It is you liability to make payment of gratuity as the the law and you need to make provisions in your books of accounts every year towards your liability. This liability is to be worked out by actuaries on your behalf. This means you need to appoint actuaries for this purpose.
If you contribute for such scheme with any of the insurance companies, appointment of actuaries and making provisions in books of accounts is taken care of automatically.
5th January 2013 From India, Mumbai
Respected Korgaonkar K A
If the company is not having LIC scheme then, Please guide all of us in this matter, The employee is elegible for Gratuity or not and upto when his family will get the Gratuity, please give the calculation for this matter, I think it will help to all of us (Members of this site)
5th January 2013 From India, Mumbai
Dear Ramu, Yes the concerned employee will be eligible for Gratuiy Payment for 4 months that he served the Company. Best Wishes, Vasant Nair
5th January 2013 From India, Mumbai
Dear all 1) In the earlier reply I assumed that Employee under reference is regular employee 2) If, remember if you have made LIC Group Gratuity Trust & the employee's name is included in the LIC list, then only LIC will calculate gratuity as if employee has rendered service up 58 years of age.3) Employer has to submit the claim form to LIC 4) It is not obligatory on the part of employer to make LIC Group Gratuity trust. Employer is only liable for payment of Gratuity for the services completed by employee.5) Gratuity calculation Formula Salary (Basic+DA )= 5000/26X15X20 years=Rs 57692/- 6) As mentioned above if employee is a member of PF & FPF his family ( Widow/widower ) will be eligible for pension & PF withdrawl benefit as per PF Act 1952
SDP
5th January 2013 From India, Kolhapur
Dear Syed ji, Your query is replied by Shri. S D Patil. Gratuity calculation formula take it as example. This case the nominee of deceased is entitled for gratuity of 1 year i.e. 15 days salary.
5th January 2013 From India, Mumbai
Dear SDP,

Your advice is not quite correct. Please read my comments as under:

1. It is incorrect to advise that "you legally not required to pay gratuity as the person under reference has rendered only 4 months service".

In this case, the Company is legally obliged to pay Gratuity to the nominee of the deceased, calculated for 4 months' service.

2. Again, your suggestions that, "However service period of 6 month or more is considered as one full year while calculating gratuity, you assume as he has rendered one year service & pay the gratuity as good gesture"...is also not quite right.

The deceased has worked only for a period of 4 months, then where does the supposition of his having worked for 6 months or more, come in.

Yes, as a gesture of goodwill you may decide to pay the nominee of the decased employee Gratuity on the assumption that he worked for a period of one year. Wonder if you would like to set a precedent by doing so??

Factually, you are required to pay to the nominee of the deceased Gratuity ONLY for 4 month's service.

Best Wishes,

Vasant Nair




5th January 2013 From India, Mumbai
Hello Seniors,
In my opinion the definition of entitlement of gratuity is as :
"Gratuity is payable to an employee (nominee – in case of death of
employee) who has rendered continuous services of five years or more on his termination
of employment, superannuation, retirement or resignation. Completion of continuous
service of five years is not necessary where the termination of employment is due to
death of disablement."
If any notification/GO regarding six months service is compulsory please share.
BK Sirohi
5th January 2013 From India, Shimla
Dear Ramu HR,
As per Gratuity Rules, if he is a permanent employee, he will get gratuity.
If your employer is having LIC's GGCA sceheme, he will get the befit immediately within 5 days of submission of relevant documents.
Small Note on LIC's GGCA:The premium is paid by the employer on behalf of the employee by making a trust. After making the trust deed, you can get registered with LIC and after making the payment of Premium & approval of LIC, you can approach the Income Tax Dept for approval which will be beneficial for your employers on long run as well as of the employees.
Regards.
Ravi
6th January 2013 From India, Mumbai
The humane approach in all the above replies shows something should be done to grant gratuity to the deceased eventhough the employee is not eligible.In respect of pension, minimum pension is granted eventhough the employee does not complete the requisite minimum period of service,which is a benevolent gesture to the deceased.The above discussions drives home this point and everybody will accept that the same methodology should be devised and the gratuity act needs amendment to fix a minimum amount of gratuity to an employee who dies without meeting the minimum service as in the case of pension also.Te cite-man shold initiate action to put the suggestion into reality.
7th January 2013 From India, Chennai
I appreciate S.D Patil's interpreation of the provisions of the Gartuity Act to determine whether the payment is due to the deceased employee and keshav koregaonkar's inputs on LIC and his suggestion to go for the LIC Scheme so that it can cover circumstances of this nature. however I need one clarification.Mr.kannan says that in this case the employer may not be able to submit claim to LIC since he is not eligible for gratuity under the Act.But technically, the deceased employee is eligibel for recieving gartuity but the gratuity could not be computed uner the Act as the employee rendered less the 6 months of servcie. My question is whether this will render the employee ineligible for gartuity under LIC scheme also,assuming such scheme covers the employee as he is technically eligible for gratuity under the Act.
B.Saikumar
HR & Labour Law Advsior
Mumbai
7th January 2013 From India, Mumbai
Mr.Sirohi It is there in Sub-section(2) of sec.4 of the Payment of Gartuiy Act 1972 and no notification is needed in this regard B.Saikumar HR & labour Law advisor Mumbai
7th January 2013 From India, Mumbai
Dear All,
I thank Mr.Saikumar for highlighting the misleading information given by me the employee is ineligible for Gratuity. Upon reviewing the act I observe that in the event of death the qualifying period of 5 years shall not be necessary. Apologies for misleading the forum.
Payment of gratuity.-
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease;
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement :
Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to the heirs.
Regards
M.V.KANNAN
7th January 2013 From India, Madras
Dear Kannan ji,
Greetings!
I feel there is no need to tender apology by you. Please remove from your mind that you have misleaded the forum. We all are learning here by sharing our views. We get an opportunity to review and correct ourselves by discussions. No one is cent percent perfect and we can march towards perfection at optimum level by healthy discussion.
I hereby take an opportunity to say here that we all should make our own study before we reply. I am not telling this to you. It is a general statement which is applicable to me also. When we discuss on fact of law, we should be very careful. On question of law we can and we should differ in very polite way.
Looking forward for active participation from you as well by other members.
8th January 2013 From India, Mumbai
Kannan Sir
I agree with Mr.keshav Koregaonkar.There is no need to regret. In fact I want to clear my understanding about the eligibility of a deceased employee vis-a-vis LIC Scheme. You have now clarified it. Thanks.
B.Saikumar
HR & Labour law Advisor
Mumbai
8th January 2013 From India, Mumbai
Dear Vasant Nair

You have differed from S.D.Patil's view and according to you, the deceased employee( or his nominees/legal heirs) is entitled to gratuity even for four months. I hold the same view as that of S.D.Patil.Probably you appear to have based your finding on Sub-sec.(1) of sec.(4). No doubt Sec.4(1) dispenses with the requirement of 5 years of continuous servcie in case of death or disability and makes such employee eligible for gratuity.

Thus Sec.4 (1) deals with mere eligibilty. Once the eligibility is decided under Sec.4(1), then the next question is how much gratuity is to be payble to the employee. That question is not answered by Sec.4(1) and that is answered by Sub- Sec.(2) of Sec.4 of the Gratuity Act . Sec.4(2) links the quantum of gratuity payable to an employee to the period of sevice rendered by him in the organisation. It says gartuity is payable at the arte of 15 days wages for every completed year of servcie.

Therefore the Act desires that an employee shall atleast complete one year of service. In construing an year of service, Sec.4(2) considers any period of service in excess of six months as one year.This is the mandate of Sec.4(2). Therefore Mr.Patil said that the deceased employee is not eligible for gratuity in view of his 4 month servcie. Probably this must be the reason as to why he said that gratuity in this case an be paid by the employer as a good will gesture. I also subscribe to this view.

B.Saikumar

Mumbai
8th January 2013 From India, Mumbai
Dear Kannan & Koregoankar,
Really it was a meaningful discussion to all, in the we reached on a perfect result. Really its a good platform where we can share and can get results for our compliance related problems.
8th January 2013 From India, Mumbai
This has become very interesting.
Section 4 of the Act stipulates the pre-condition of completion of 5 years' continuous service to become eligible for payment of Gratuity. It also sates that this pre-condition does not apply in cases where termination of service is caused by death.
Sub Section (2) of Section 4 clearly states that for every completed year of continuous service or part therefof in excess of six months shall attract payment of one year's gratuity.
In this case the employee has worked only for 4 months and is therefore eligible to payment of Gratuity only for these four months.
I would like to stay with my original opinion that the deceased's nominee is entitled for Gratuity claculated for 4 months.
Vasant Nair

8th January 2013 From India, Mumbai
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