Gratuity Calculation in Case of Employee Death: How Do You Approach It?

Dear all, Kindly provide us the Gratuity calculation in case of death. Please find below details of the employee:
DOJ – 14-May-07
DOB - 20-Aug-62
Basic - INR 26,375
Regards
Aditi

Hi,

In the case of death gratuity, the calculation will be based on the formula: (BASIC + DA/26) * 15 * Number of years of service until retirement.

Thank you.

Dear Aditi,

The minimum service of not less than 5 years' continuous service is not necessary in the case of termination of employment due to the death of the employee. You have to compute gratuity based on the actual number of years of service rendered by him until his death only. Therefore,

Amount of gratuity in case of death = Last drawn wages [sum of basic + D.A] / 26 X 15 X Number of years of service rendered.

Gratuity Fund Investment in LIC's Death Cum Gratuity Scheme

If your gratuity fund is invested in LIC's death cum gratuity scheme with an additional benefit that will accrue in case of death, then only the gratuity will be paid based on service till the date of retirement.

Mandatory Investment as per the Payment of Gratuity Act

The Payment of Gratuity Act, by its section 4A, has mandated investing the gratuity fund in LIC, but the same is being implemented by the state according to their choice. Some states, like Kerala, have notified the date on which this provision has become mandatory. If your state has notified the date on which section 4A is made effective, then your establishment should also invest your gratuity fund in LIC or such other insurers which are notified by the state for this purpose.

Advisability of Death Cum Gratuity Policy

Again, it is not mandatory that you should take a death cum gratuity policy, but it is always advisable to have this kind of policy which will assure payment of gratuity based on service till the date of superannuation in the case of death while in service against payment of a small premium.

Therefore, please check whether your establishment has taken a policy like this, and if so, the dependents of the deceased will get the benefit of higher gratuity. The gratuity in such cases is paid not by the employer directly to the employee or the dependents of the deceased employee but by the LIC to the Gratuity Trust and then by the gratuity trust to the employee or the dependent of the deceased employee, as the case may be.

Regards, Madhu T K

Dear Aditi,

As per the details provided, if he left or died in the month of November, then the gratuity amount would be Rs. 159,771.63. This calculation is based on 26,375 (basic + DA) divided by 26 (work days in a month) multiplied by 15 years of service multiplied by 10.5.

Thank you.

Gratuity Calculation and Service Fraction

There is no fraction of service in gratuity calculation. Any fraction of actual service over 6 months (let it be 6 months and one day) will be taken as one year, and any fraction of service of less than 6 months (let it be just one day short of 6 months) will be ignored. If the fund is linked to LIC's death cum gratuity scheme, the calculation is different. Please follow the previous post.

It is very interesting that the thread starter, Ms./Mr. Aditi, has not replied to various queries put by us, implying that she/he is not interested in taking our advice. This is just unprofessional from an HR person.

Regards, Madhu T K