How Do I Calculate Gratuity for an Employee Who Passed Away Shortly After Joining?

Hi Seniors and fellow HRs, I have been struggling to calculate gratuity for a deceased employee who has only worked for a few days from his date of joining. Should I calculate for all the working days as tenure, or do I need to calculate a percentage of the tenure for a year (09/365)? Please provide me with guidance. I am awaiting the reply from seniors.

Employee Details
The date of joining (DOJ) of the employee is 01.03.2023, and the date of death is 10.03.2023.

An employee who worked for one day more than six months shall be considered to have worked for one additional year for calculation purposes. Similarly, the number of days less than six months shall be completely omitted. However, in the case of death, no such qualifying periods shall apply. This is the law. That means if the service is less than one year, or even less than six months, it is advisable to consider it as one year of service without any reference to the qualifying periods and pay 15 days' salary as gratuity.

Request for Further Clarification
I would like to request Umakanthan Sir to provide further clarification on this matter. Please, Sir...

I fully agree with the observation of Mr. Madhu.

Since the Payment of Gratuity Act, 1972, is a social security legislation, the first proviso to subsection (1) of section 4 provides for a statutory relaxation from the minimum qualifying service prescribed in the main part of section 4(1) in respect of termination of employment arising out of death or disablement due to accident or disease.

If the method of calculation prescribed under section 4(2) is strictly applied in such a case of death or disablement while in service that falls below 240 days, which has to be calculated backwards effective from the date of termination, no gratuity can be paid as the actual service rendered simply escapes the deeming provision enunciated under section 2-A, which defines the term 'continuous service' for the purpose of the Act.

Thus, a conjunctive reading of the minimum qualifying service mentioned under section 4(1) and the definition of the same under section 2-A of the PG Act, 1972, would bring out the legal position that the calculation mentioned under section 4(2) cannot be independent of the deeming provision of section 2-A and the relaxation of the first proviso to section 4(1) of the Act.

Therefore, I would also suggest the poster act as per the advice of our friend Madhu.

What Are the Conditions for Claiming Gratuity?

An individual is eligible to claim gratuity if he/she meets all these three conditions:

1. He/She must have served in the same capacity in the last two years immediately preceding the date of death.
2. It must be within six months after the end of the financial year in which the death occurs.
3. He/She must not have retired before the date of death.

Members, please offer views on applicability -- 2 years minimum.

There cannot be any such service condition or requirement of the company attached to any legal provision. If the Act governing the payment of Gratuity states that it is payable without considering the qualifying service of five years in the case of an employee's death, it should be paid. You cannot create your own laws attached to a legislative provision.

Interesting...!

"In India, it is defined as 'compensation payable on account of death'..." Is it?

"It is taxable...!"

"The amount of gratuity which can be deducted from gross salary is limited to ₹10,000 per month..."

I think the author is referring to something else and not the one as per the Payment of Gratuity Act 1972, which is applicable to private establishments and also to public sector companies. There can be some settlement wherein the way in which gratuity is arrived at, like as against 15 days' salary for every completed year of service, it can be 30 days' salary, etc., but the principles of payment remain the same. The one available in the link is not with reference to our situation.

I think what the colonel refers to is the death-cum-retirement gratuity applicable to Government employees. Gratuity for industrial employees throughout India is governed by the Payment of Gratuity Act, 1972, or the service regulations if they have better terms.

I had posted an extract seeking comments not on what is wrong but on the applicability of gratuity in the case of death.

Dear Col. Suresh Rathi, What we have commented is based on the law. As our Senior Member, Umakanthan Sir, has mentioned, what you have referred to are government norms for gratuity. You can follow them provided your case is related to government service. If you require comments regarding gratuity payable in the event of the death of a private sector employee, please refer to comments #2 and #3 above.

I have gone through the comments. Thanks. Are organizations getting insurance as mandated in the Gratuity Act?

Thank you. I was not aware that it is state-specific. Enlightening.