Gratuity Eligibility: What Happens if an Employee Has a Fatal Accident After 3 Months?

If an employee met with a fatal accident outside the factory after 3 months of joining, will he be eligible for Gratuity?

As per the Gratuity Act, there is no qualifying tenure of continuous service of 5 years to be eligible for gratuity in case of death or disablement. Hence, you need to pay gratuity to this employee.

If death occurred due to this accident, then where will this employee get gratuity? Moreover, in this case, the service period is only three months. So, where will the nominee or legal heirs receive the gratuity amount from the employer?

Regards, R N KHOLA

As I understand, in the case of death, gratuity will be paid irrespective of whether it is accidental or natural. However, the service period is only three months. Will his nominee or legal heirs be paid gratuity for such a short period or not?

You are correct, Hemu; gratuity becomes payable irrespective of the completion of the minimum qualifying service if the employee dies in harness. The place or reason for death is immaterial.

Gratuity Calculation Under PGA, 1972

Since the basic unit of the duration of service rendered for the purpose of the calculation of gratuity under the PGA, 1972, is one year, a shorter spell of service like 3 months on the date of death will really be a problem for the employer to tackle with humanitarian consideration only. Had the employer taken a special gratuity insurance policy with a life cover on payment of some additional premium, the insurer will pay the gratuity for the entire service up to 58 years of age of the deceased employee.

Humanitarian Considerations and Options

If not, payment of the minimum gratuity for one year plus some sizable sum by way of ex-gratia as well as employment on compassionate grounds to the legal heir of the deceased if possible is the only befitting option in this extraordinary case.

This suggestion is purely based on humanitarian consideration only. If there is a will, there is a way. After all, charity begins at home only, and so is Corporate Social Responsibility!

Eligibility for Gratuity Under the Payment of Gratuity Act, 1972

Proviso 1 of Section 4(1) of the Payment of Gratuity Act, 1972, makes it clear that the completion of the eligibility period of continuous service of five years is not necessary when the termination of employment is due to death or disablement. Therefore, the liability is absolute, whether five years of service is completed or not.

However, the Act further specifies in subsection 2 that:

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.

Reading these together (applying the theory of Harmonious Construction), the minimum service must be in excess of six months, below which there shall be no statutory liability.

In the unfortunate circumstance where the breadwinner of the family is tragically taken away, what respected Umakanthan Sir has proposed as a humanitarian consideration is recommended.

The deceased employee is eligible for gratuity at 15 days, considering his employment period as one year.

Gratuity Eligibility for Deceased Employees

The act is silent and has not provided the eligible criteria for the minimum working period prior to his death. As per Section 4 of the Payment of Gratuity: Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, except in cases of death or disablement due to accident or disease. Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

Thank you.