Understanding Gratuity Act Rules: What Happens in Case of an Employee's Death?

Can you please let me know the rules of the Gratuity Act regarding death cases?

Thanks in advance.

Regards,
Ramoji

Gratuity Act Provisions for Death Cases

Under section 4, in the case of the death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs. Where any such nominees or heirs are minors, the share of such a minor shall be deposited with the controlling authority. The controlling authority shall invest the same for the benefit of the minor in such a bank or other financial institution as may be prescribed until the minor attains majority.

Regards

Legally, yes, gratuity is not payable. However, if death is due to natural causes, and if you could convince your management, you could calculate 15/26 x every completed year of service. It all depends on how you value your employees' service to the organization. You can always justify it as special circumstances and not to be taken as a precedent.

Gratuity Payment in the Event of Natural Death

In the event of a natural death, the Gratuity is to be paid for the number of years the employee worked. For example, if an employee worked only for 6 months, he or she should be paid the Gratuity for ONE YEAR. The calculation is Basic + DA x 15 days / 26 days. Here, the Gratuity Act's 5-year completion of service does not apply. Gratuity eligibility—5 years+ service is applicable only to employees who are in continuous service. This is different. The natural death of an employee, for which Gratuity is to be paid, is completely different. Please do not mix up both together.

Regards,
Sundararaman

I would like to add one more point: if there is any gratuity policy taken through LIC or any insurance agency, then in the case of death while in service, gratuity is calculated as if the deceased employee has served up to 58 years, and gratuity is paid accordingly. For example, if an employee joins the company at the age of 25 and expires after working for two years, then his/her legal heir will be paid gratuity for 33 years.

Regards, Uday

I would like to add one more point. In gratuity calculation, at the end of gratuity payment, which basic salary are we supposed to count: the last basic or the basic at the time of joining?

Regards,
Hiren Jobanputra