Payment of Gratuity in case of death during the services

If an employee expired during the service & after completion of 05 years uninterrupted service.What is the calculation of Gratuity?
Is he applicable for gratuity till the date of his probable retirement?
Dose the total service (till Retirement) count for the calculation?

Generally those who have Gratuity Fund with LIC in that case Gratuity is been paid till the retirement age.

Gratuity is payable in case of death even if the eligibility period of 5 years continuous service is not completed (Proviso to section 4(1) of PG Act 1972). Various organisation have adopted voluntary coverage under which death with less than 5 year service is paid 3 month salary at least. Reckoning total service upto the normal date of retirement is a very rare welfare measure voluntarily undertaken by some organisations, otherwise the calculation is based on fifteen days salary for every completed year of service.

Yes, as per Gratuity Act, the gratuity is payable up to the date of death irrespective whether he completed five years or not. However, where the employees is covered any group gratuity insurance scheme, a case may arise for payment of gratuity till retirement depending up on the terms of insurance cover.
B.Saikumar
HR & Labour Law Adviser
Navi Mumbai

The compulsory insurance contemplated under sec.4-A of the PG Act,1972 is primarily to shift the liability of the employer to pay the amount of gratuity to his employees strictly as per the provisions of the Act to the Insurer in case of inability of the employer due to various reasons like closure or bankruptcy of the establishment. Actually, I am not aware of any Insurer who collects the annual premium based on the current rate of salary paid to the employees admitting any claim calculated at a higher rate or on the basis of more liberal formula than the statutory one when the occasion for payment of gratuity arises. Learned friends Ms.Prashant and Saikumar may throw more light on their stand so as to enlighten me in this regard

Dear Sir,
In our company(Coal India Limited), all employees are covered under group gratuity insurance scheme in collaboration with LIC. If any employee dies in harness, his nominee will be eligible for normal gratuity up to his death and thereafter gratuity calculated on the basis of last wages drawn at the time of death till his notional superannuation date.

Dear Gautham,
The policy and practice of your Company in respect of payment of gratuity to the employees dying in harness are, in fact, highly commendable. The P.G Act,1972 also upholds such a right of the employees to receive such better terms of gratuity under any award or agreement or contract with the employer u/s 4(5) of the Act.
However, your reply conveys that the normal gratuity payable up to death is by the Insurer and the rest up to notional superannuation date is by the Company on its own. Can you clarify, please?

Dear Umaknthan
I was not associated with the working of such scheme as my organisation didn't have it. However, I have been informed by some HR colleagues that some companies float such group gratuity scheme by tying up with LIC. As per the information I gathered from them, I understand that a company enters into an agreement with LIC to frame the Scheme in the company's name.The fund will be created by the premium deposited by the company every year. The premium will be calculated on the basis of the number of employees, their age and date of joining and their salary(basic+ DA). The LIC acts as a fund manager and invests the funds. It seems the LIC assess the fund liability every year on the basis of the claims settled during the year and the fresh list of employees with all the above details submitted every year which includes employees left and employees joined during that year. It seems any short fall in fund will be made up for by the employer.
The salient feature of this scheme seems to be that the liability of the employer to pay gratuity is born by the LIC and the employee in case of death during service, will be paid gratuity that could have accrued to him till retirement had he been alive.But It is not clear tome whether an employee is paid gratuity even if he leaves before completion of five years.
As you said the Gratuity Act permits any scheme with better terms.
Any one who is associated with actually working of the scheme can better elaborate it.
B.Saikumar
HR & Labour Law adviser
Navi Mumbai

Having been associated with LIC tie-up in gratuity matter, it is confirmed that the most popular scheme is where the liability is limited to the death. Exponentially extending it to the date of retirement is not a statutory liability but is a voluntary welfare benefit which could be offered by LIC but the premium would be manifold.

Hi All,
Details of LIC's Group Gratuity Cash Accumulation Plan.