Navigating Gratuity Obligations After an Employee's Tragic Death During Probation

Dear seniors, My question is regarding one of our employees who died by suicide due to family reasons. He was just 43 days old in the company and still under probation. As a company, what will be our liability towards him? Ours is a private limited company. We have ESI, but he is out of that limit. We are in the process of registering with EPF and considering gratuity. Since he has not completed 5 years, do we need to pay him? (That's what I understood from the rule below).

Payment of Gratuity Act - Point No. 6

6. 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 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. If any such nominee or heir is a minor, the shares of such a minor shall be deposited with the controlling authority who shall invest the same for the benefit of such a minor in a bank or other financial institution, as may be prescribed, until the minor attains majority.

Please help us as this is a very rare case.

Thank you,

MM

Even assuming that he is eligible for gratuity under Sec. 4(1) of the PG Act, I wonder whether any gratuity is payable to him since, in terms of Sec. 4(2), gratuity is payable at the rate of 15 days' last drawn wages for each completed year of service. Only where an employee puts in service in excess of six months will it be rounded off to one year. In this case, the employee has only served for 43 days, and thus he cannot be considered to have completed one year of service. This is my view.

Regards,
B. Saikumar

The employee, per se, is eligible for gratuity; in the case of death, the condition of completing five years of service is not applicable. Thus, we cannot say that the deceased employee was not eligible for gratuity.

Now, when we consider the amount, you are right that since he has not completed one year, he cannot be paid any gratuity (i.e., 15 days' wages for every completed year of work). However, if the company has a benevolent policy, they can pay 15 days or a month's salary as gratuity or even more (ex-gratia amount).

Understanding Ex-Gratia Payments

The term "EX-GRATIA" itself means done from a sense of moral obligation rather than because of any legal requirement. One should remember that any labor act does not prevent an employer who wishes to go beyond the limit of the law.

Legendary companies like the Tatas are live examples of such benevolent and employer-friendly practices. Moreover, many companies are known to provide a significant amount to the bereaved families in case of tragic or accidental death as Ex-Gratia payment.

Broaden the Outlook

We should aim to broaden the outlook of our members by referring to good and worth-emulating examples, rather than confining their minds to small, petty-minded company practices.

Just imagine the kind of motivation (which translates to higher productivity), loyalty (which translates to reduced attrition), etc., that such opportunities (even in tragic events) provide to the company in terms of solidarity and support for the employees.

Warm regards.

Dear Raj Kumar,

Thanks for your response. I have no issue with his eligibility, and I even conceded that in my reply. I confined myself to the Payment of Gratuity Act since the queriest sought to know the entitlement of the employee to gratuity in given circumstances under the Gratuity Act. Yes, I agree with you on the suggestion that employers should pay some ex gratia or compensation on humanitarian grounds to employees who die during service and are deprived of gratuity under the Act on technical grounds.

Regards,
B. Saikumar

Dear Saikumar,

Thanks for your comments. Even though my response was addressed to you, it was directed towards all members in general. I had taken cognizance of the words in your reply, "Even assuming..."; as my contention is that there is no case for even "assuming," as the deceased employee is "actually" eligible for gratuity.

Warm regards.

Appreciate your views. On humanitarian grounds, compensation shall be given to her family members. However, it is worth noting that if she had committed suicide, then there might have been some harassment or other issues with her that need to be identified and addressed accordingly. For example, if she committed suicide because of pressure from her in-laws or some other reason, then it may not be appropriate to compensate those members. In this scenario, should the compensation be paid to her children, parents, or nominee? Please advise.

For my clarification and as per the law, in the case of suicide, I don't think it would be covered under any compensation. I believe that gratuity or compensation should be paid in the event of accidents, natural death, or on medical grounds, but not in the case of suicide.

Please advise.

Please understand the words of the relevant section in the correct perspective.

On His Death or Disablement Due to Accident or Disease

By the way, 'Suicide' is an offense! So, since death is not due to accident or disease, no amount is payable legally. However, if the company is generous, they may pay any amount they feel is appropriate.

Regards,
Colonel J. Gahlot
Proprietor, 'TRURECRUIT'
[Phone Number Removed For Privacy Reasons]

Dear Anurag and MM,

Not going into the legal aspect of Criminal Law; such matters can be dealt with benevolently on a case-by-case basis. Although committing suicide cannot be considered a rightful act, one must look at the extenuating circumstances and the apparent helplessness that must have forced the individual to take such an extreme step. Taking a humanitarian view, the payment of some ex-gratia amount to the deserving survivors/dependents in the family and/or providing any suitable employment opportunity is a humane and praiseworthy act. We are all human resource professionals.

Warm regards.

The discussion is gaining piquancy with the response of the Colonel. Legally, his viewpoint is correct. Please, anyone may be gracious enough not to advance the argument of whether suicide can also be considered as death due to disease on the presumption that psychologically the tendency to suicide arises because of a constantly depressed state of mind and dejection. In such a twilight situation, what should be appropriate and important would be who the ultimate beneficiaries are. As rightly told by Rajkumar, what a welfare legislation ensures is only minimal relief to the affected, and I would like to submit that in any ameliorative action arising out of compassion, doubt stemming up from a legalistic mindset cannot be an effective restraint.