Gratuity Payment in Case of Employee Death
Gratuity is to be paid to an employee who dies before completing the qualifying service of five years. However, the Act is silent with respect to any minimum service in the case of death. For the purpose of calculating the amount of gratuity, a service period extending six months shall mean one year, whereas service of less than six months shall be ignored. Therefore, if the deceased had worked for at least six months and a day, their dependents would have received gratuity calculated at the rate of 15 days' wages/salary. However, in a death case, even if the service of one day is considered, the gratuity will not exceed what one should receive for one year, i.e., 15 days' salary.
Nominations and Gratuity Payment
The Payment of Gratuity Act has made it obligatory for the employer to obtain nominations from all employees who have completed one year of service. The purpose behind this provision is that if any employee dies, their dependents/nominees should receive gratuity without facing difficulties. If the employer is to provide gratuity to dependents of a deceased employee who worked for less than one year or two months, as in the instant case, there could have been a provision that nominations should be collected from an employee as and when they join the establishment, similar to ESI or EPF. In the absence of it, and since there is a provision that nominations are to be collected from employees who have completed one year of service, the question of payment of gratuity to dependents of an employee who died before completing one year of service is uncertain.
Regards,
Ashutosh Thakre