Navigating Employee Death: What Compensation and Actions Are Required?

One of our employees passed away a few days ago. He had been working at our company for the past 6 months as a permanent employee with a monthly salary of 5000. Please let me know what compensation the company is obligated to provide in this situation as he passed away at his home. What actions should we take, and what compensation is he eligible for?

Thanks and regards,
Jyoti Kushwah

The family of the deceased employee is eligible for his PF, EPS pension, and EDLI insurance benefits from the PF contributions he made. Additionally, from ESI, the family will receive cremation expenditure and some insurance benefits (please check with ESI). Please prepare the F&F settlement voucher and pay them the earned salary pending against him.

Thank you.

First of all, you have to confirm what benefits are provided by your organization to an employee. Is there any group insurance policy being provided by your company? PF and pension will be provided as per the Acts. Out of this, he will get EDLI (Employee Deposit Linked Insurance) at ₹1,30,000/- (if he completes 6 months, or else he will get it on a pro-rata basis). If he expires in the office or on duty (sent by an employer's work), then he will get a pension from ESI.

The deceased employee's family would be entitled to gratuity calculated at the current pay (Basic + DA) from the day he joined up to the date of his attaining 58 years. Please check the Payment of Gratuity Act, 1972, and act accordingly. The Act states that "Gratuity shall be payable to an employee on 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, resignation, or (c) on his death or disablement due to accident or disease.

An employer will be liable to pay gratuity to the legal heirs/nominees of the deceased employee even if the employee had not completed five years of service."

The deceased employee's family would be entitled to gratuity calculated at the current pay (Basic + DA) from the day he joined up to the date of his attaining 58 years. I don't think we have to provide up to 58 years if an employee expires before attaining the retirement age. We used to provide up to the service he rendered in an organization. This is my doubt only, please confirm...

Dear Jyoti,

First of all, you have to confirm what benefits are provided by your organization to an employee. Are there any group insurance policies being provided by your company? PF and Pension will be provided as per the Acts. Out of this, he will get EDLI (Employee Deposit Linked Insurance) at ₹1,30,000/- (if he completes 6 months; otherwise, he will get it on a pro-rata basis). If he expires in the office or on duty (sent by an employer's work), then he will receive a pension from ESI.

To get EDLI, one day attendance will suffice. In such cases, a pro-rata basis will not be applicable. If the salary is ₹5000, EDLI will be ₹1,00,000 and not ₹1,30,000 (i.e., 20x5000). Additionally, widow pension will be ₹1901 and child pension ₹475.

Abbas.P.S

Gratuity Payments through LIC Group Gratuity Scheme

In case you service the gratuity payments through the LIC group gratuity scheme, the calculation will be: completed years of service + future service up to the completion of 58 years X current basic + DA as on the date of death/26, subject to a maximum of Rs. 3.5 lakhs. The premium charged by LIC duly covers the future liability also, and hence, the gratuity is paid up to the completion of 58 years.

Direct Company Payment of Gratuity

In case the payment is directly made by the company, you may calculate gratuity up to the date of death. Section 2 of the Payment of Gratuity Act 1972 is silent on the payment of gratuity for the remaining years of service, and hence several employers do follow this procedure without considering the remaining service period. It is up to you to decide what is best for your employees.

The issue seems to have gotten mixed up with the various entitlements of the employee vis-a-vis the compensation, if any, payable. In the instant case, since the death of the employee took place at his residence and has no direct relationship with the nature of work he was performing while in your company, no compensation is payable by your company. However, all usual payments such as EPF, gratuity, EDLIS, family pension, ESIC amount, as admissible, shall be payable to him.

Regards,
S.K. Johri

According to my knowledge, he is eligible for the due salary for the days he worked. The nominee is eligible to claim the PF amount through Form 20. Additionally, the nominee is eligible to claim the Pension fund if he completes 6 months of contributions through Form 10 D. The nominee is also eligible to claim EDLI (6*6500=39000) through Form 5IF. However, the nominee is not eligible to claim gratuity as the deceased employee had not yet completed one year of continual service (if company policy applies). The nominee is eligible to claim the gratuity amount if LIC-linked group insurance is in place. Finally, the nominee is eligible to claim funeral expenses if covered by ESI.

Please comment.

Regards,
Raju

In the above reply, the EDLI benefit will be calculated based on the contributed months multiplied by Basic + DA + retaining allowance, if any.

6 * 5000 (if the Basic + DA is equal to 5000) = 30000/-

Raju

In the above case, the EDLI benefit is 20 times the salary, i.e., Rs. 100,000. I don't know how Mr. Raju calculated it as 6x5000.

Regards,
Abbas.P.S