Gratuity Calculation After an Employee's Death: Does Unserved Service Count?

Please let me know if there is any rule/law as per Gratuity Act for the calculation of gratuity in case of the death of an employee. I mean, whether the remaining period of unserved service after the death of the employee shall be considered for calculating gratuity.

Dear Member,

The Payment of Gratuity Act, 1972 does not have any provision regarding the payment of gratuity by the employer to the nominee(s) / legal heir(s) for the remaining period of unserved service after the death of the employee. The payment is to be made only for the actual service rendered by the deceased employee.

Regards,

R.N. Khola

Dear R.N. Khola,

Is the training period of any employee considered complete after five years?

Regards,
Ashish

Hi Ashish,

Gratuity is not related to experience but the number of years in service. If you have paid a salary instead of a stipend to the trainee during the training period, that will be considered.

Regards,
Rashee

Gratuity Calculation in case of Death - regarding this, we have the opinion of our legal consultant that it is necessary to calculate gratuity in the case of death.

Regards,
Sandip Kumbhar
Jr. Personnel Officer.

The payment of gratuity is done based on the actual service rendered or completion of 5 years is a must.

Sumit

Dear jks64,

As per the guidelines of the Gratuity Act, gratuity calculation is as follows: 15 days' wages for every completed year of service or part thereof in excess of 6 months. The Wage/26 x 15 days x Number of years of service (if he has put in 17 years + 7 months, then it is considered as 18 years). You need not consider his future service in the case of death.

However, in case you have a Group Gratuity Scheme with LIC OF INDIA, they cover the risk, and the nominee of the deceased employee receives gratuity for the service rendered and the service that he would have rendered in the company if he were alive (future service as well). This is a wonderful scheme that will be beneficial for HR professionals. Please contact LIC and make an annual payment to LIC; this will also earn interest every year. Advise your Finance department about the benefits, and they will be convinced.

All the best, M.V.KANNAN

Dear Member,

Gratuity is payable to an employee for the service he has rendered to the company. In case of death, the company is not liable to pay for the future unserved service period. The payment is not necessarily for the completion of 5 years in case of death and permanent disablement. The calculation is done as mentioned above by Mr. Kannan.

Person to whom gratuity is payable in case of death of the employee:

In short, subsection (1) of the Gratuity Act 1972 states that it is payable to the nominee and where no nomination has been made, to the heirs of the employee.

Regards,
Shreekanth.P.R

* Last wage drawn X 15/26 Days X Number of years worked = Gratuity Amount.

* Completion of 5 years in the case of death is not necessary.

* 15 denotes the number of days per year.

* If an employee has completed 6 months in any year, it will be considered as a year, and we will calculate 15 days for that year as well.

Yes, the training period is also part of an employee's employment if there has been no definite break in service or if the training is under the Apprenticeship Act.

Vasant Nair

PS: Mr. Khoda, I hope you do not mind my answering this query.

As per the Payment of Gratuity Act, gratuity is paid for actual years of service irrespective of whether the employee completed 5 years or not in cases of death. However, if you have opted for the LIC Group Gratuity scheme and have paid the contributions, full gratuity will be paid by LIC in the event of the employee's death, including the remaining service balance. This is an added advantage if an LIC policy is taken.

Dear Vasant,

Before giving any opinion, we should go through the definition of the employee, which may be read as under:
"Sec 2 (e) 'employee' means any person (other than an apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company, or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work, whether the terms of such employment are express or implied, and whether or not such a person is employed in a managerial or administrative capacity. However, it does not include any person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity."

After going through the definition, it is clear that an apprentice is not covered under this Act. However, it seems that we are not to consider the length of service of a trainee if they do not perform any skilled, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work. If a person is appointed as a trainee under the I E (S O) Act, 1946 / CSO and does some work of any of the natures detailed above as part of the training scheme, then, in my opinion, this period of service should not be treated as service rendered for counting the service period for the payment of gratuity.

In general, management, after the completion of the trainee period, if there happens to be a vacancy, then they may re-employ them after clearing the F&F and adopting the procedure for interviews, etc. After adopting this procedure, we are not required to apply our minds for the consideration of this service period. Therefore, if a person is appointed as a trainee and does any of the work as mentioned above, then their service should be considered in the length of service for the consideration of the period of service under this Act. The interpretation of this matter ultimately depends on the Authorities under the Act; however, the situation is more favorable for a person who has worked as a trainee and is in continuity of service.

Opinion/comments submitted as requested.

Regards,
R.N.Khola

Vasant Nair said: "Yes, the training period is also part of an employee's employment, if there has been no definite break in service or if the training is under the Apprenticeship Act."

Vasant Nair
PS: Mr. Khola, I hope you do not mind my answering this query.

Hello jks64,

I have read your topic. As far as the Payment of Gratuity Act, 1972 is concerned, gratuity is paid to an employee only for the actual service rendered by the employee. There is no provision for calculating and paying gratuity after the death of an employee, or it may be termed that the unserved period cannot be taken into account. For death cases, it is not necessary to complete five years of service.

pkc3000

Dear Vikas Singh,

You have mentioned that 6 months of attendance will be considered as one year for gratuity calculation, but this statement is not correct.

According to the Gratuity Act, periods in excess of 6 months will be rounded up as one year. Consequently, 6 months and below will be rounded down and will not be taken into account for gratuity calculation.

Abbas.P.S

Dear Member,

The Payment of Gratuity Act, 1972 does not have any provision regarding the payment of gratuity by the employer to the nominee(s)/legal heir(s) for the remaining period of unserved service after the death of the employee. The payment is to be made only for the actual service rendered by the deceased employee. However, it is at the discretion of the management to pay gratuity for the balance period as well. In our organization, we pay for the entire service period (up to 58 years) in case of death on the premises.

For actual or normal death, we only pay for the service period. Additionally, we do not consider the apprenticeship period for calculation purposes. Probation and confirmation periods are the only ones taken into account for the preparation of gratuity.

Regards,
R. Palaniswamy

Dear Member,

Gratuity is payable to an employee for the service he has rendered to the company. In case of death, the company is not liable to pay for the future unserved service period. However, one must complete 5 years of service to be eligible for Gratuity.

All the best,
A.G. Rangarajan
9741155458

Hi,

In The Payment of Gratuity Act, there is no provision that the employer should pay the gratuity up to the retirement age to the deceased employee. However, there is a Group Gratuity Scheme with LIC in which LIC makes the payment to the employees after considering all those years up to the retirement age (up to 58 years) based on their present Basic+DA.

For example, if an employee has been working for the last three years in the company and is 34 years old, and unfortunately passes away during employment, LIC will make the payment for (58-34 = 24 + 3) 27 years.

Regards,
Rajiv Singh

Payment of Gratuity: Gratuity shall be payable to an employee upon the termination of their employment after they have rendered continuous service for not less than 5 years. However, completion of continuous service of 5 years is not necessary in cases where the termination of employment is due to death or disablement exceeding 6 months. The employer shall pay gratuity at the rate of 15 days salary/wage for each completed year of service. The amount of gratuity payable to an employee shall not exceed Rs. 10,00,000.

Employee's Death and Gratuity Eligibility

Can an employee be eligible for gratuity if they pass away after three months of joining the organization?

Regards,
Jagan