Is This Employee Eligible for Gratuity After a Tragic Accident? Let's Discuss

An employee ( date of birth 01.11.1997) who joined a company on 01.11.2018 ( age as on date of joining being 21) had met with a fatal road accident on 26.12..2019 .The employee;s basic salary ( including DA) was 26000/per month ( ie salary being reckoned for calculation of gratuity ) The company has enlisted him under group gratuity scheme linked to L I C of India, as applicable to regular employees .The employee's age at the time of death was 21 and he had a residual service of 37 years as the standing orders prescribes the age of superannuation as 58.
Please enlighten if the employee is eligible for gratuity and if so how much he would get ?

Before answering the query, let me reproduce herein the legal position regarding the eligibility of an employee for gratuity as explained by my knowledgeable friend, Mr. Umakanthan53. This will help to avoid redundancy and present the legal position in an exemplary manner (with due courtesy).

Eligibility for Gratuity

Gratuity is a statutory terminal benefit available to an employee upon superannuation, retirement, resignation, death, or disablement due to accident or disease after a blemishless and continuous service period of not less than 5 years, as per the provisions of section 4 of the Payment of Gratuity Act, 1972. In cases of death or disablement due to accident or disease, the first proviso to sub-section (1) of Section 4 explicitly states that a minimum qualifying service is not required. Therefore, gratuity should be calculated based on the actual service rendered by the employee on the date of his death or disablement, following the formula set out in section 4(2) of the Act. The calculation of gratuity is based on the completed years of service and the last drawn wages only. Hence, eligibility for gratuity usually depends on the termination of employment, while entitlement to gratuity primarily relies on the completed years of service. In the given scenario, although the nature of termination of employment (i.e., "death" while in service) makes the employee "eligible" for gratuity,

Response to the Query

The employee is certainly eligible for gratuity as per the statute, as elaborated above.

Length of Service and Amount of Gratuity

Since the employee is covered under a group gratuity scheme linked with LIC of India, he is entitled to gratuity as if he had served until his retirement, i.e., up to 01.11.2055 (notional extension of service). The total service period of 37 years should be considered.

With his last drawn salary being Rs 26,000 per month, he will be eligible for gratuity according to the formula below:

Last drawn salary (basic pay + DA) / 26 X 15 X 37

26000 / 26 X 15 X 37 = 5,55,000

(Rupees Five Lakhs, fifty-five thousand only)