Gratuity Dilemma: How to Calculate for Employees Working Beyond Retirement Age?

Retirement Policy and Gratuity Calculation

The company has a policy of retirement at the age of 60 years, and all provisions in the books are being made based on this policy. Funds with LIC of India are also being placed accordingly.

Gratuity for Extended Service

What would be the gratuity amount payable to an employee whose services have been extended for 2 years beyond 60 years, even though the company is providing provisions and funds are being placed with LIC of India based on 60 years as per the company's retirement policy only? During his extended period, gratuity has been revised from 10 lakh to 20 lakh.

If gratuity lies with LIC, then LIC will be liable to pay gratuity up to only 60 years of age, and the claim will be settled accordingly. A 2-year extension to the employee can be settled with mutual discussion between employer and employee only.

It is possible to collect the gratuity amount at the age of 60 from the LIC and keep the amount in the trust account for the time being. Then, after two years when the employee is relieved from service, calculate the gratuity payable for the entire period based on the salary at the time of exit at 62 years of age. Pay the amount by two separate cheques, one from the trust account and the other one from the general account.