Gratuity Calculation Dilemma: How to Handle Service Years After an Employee's Death?

Gratuity year calculation in the case of natural death of an employee on the premises. Should we consider the actual service years or calculate until retirement?

Gratuity Calculation in Case of Employee Death

According to Section 4 of The Payment of Gratuity Act, 1972, the completion of continuous service of five years is not necessary when the termination of employment is due to death or disablement.

Please note that a time period of over 6 months or more is considered as 1 year, i.e., the year of service is rounded off to the nearest integer. For example, if you have completed 5 years and 7 months in service, the length of service for gratuity calculation would be 6 years. Similarly, if you have completed 5 years and 5 months, the period for gratuity calculation would be 5 years.

Insurance Requirement for Gratuity Payments

According to Section 4A of The Payment of Gratuity Act, 1972, it is mandatory that where the number of employees is more than 500, every employer must obtain insurance for payments towards gratuity from LIC under the LIC of India Act, 1956, or any other prescribed insurer. In such cases, the deceased will be eligible for gratuity until their actual date of retirement.

Regards, Amit

Hi, I am Mathivanan. When a worker joins duty without completing 5 years of eligible service for receiving Gratuity, but unfortunately passes away during the service period, my question is whether he is still eligible for Gratuity and Notional Gratuity as well. Please clarify. Thank you.

Employee is eligible for Gratuity from the date of joining until the date of death. 6 months and above of service to be rounded off as 1 year. Less than 6 months of service to be ignored. You should furnish the employee's date of joining and date of death to give the actual calculation of the number of years of service.