I have a question in my mind about gratuity. If a worker joins my organization on the date of 1st January 2018 but unfortunately passes away on the date of 31st March 2018, will he be eligible for the gratuity amount?
From India, Ahmedabad
From India, Ahmedabad
Not at all . He has to work one year/ 240 days continuous service, than in a death case he would be eligible for Gratuity
From India, Madras
From India, Madras
Gratuity is a statutory terminal benefit of employment available to an employee upon his superannuation, retirement, resignation, death, or disablement due to accident or disease, provided the employee has served for a minimum of 5 years continuously as per the provisions of Sec. 4 of the Payment of Gratuity Act, 1972.
However, in cases of death or disablement due to accident or disease, the first proviso to section (1) of Sec. 4 explicitly states that no minimum qualifying service is required. Therefore, gratuity must be calculated based on the actual service rendered by the employee on the date of his death or disablement, following the formula outlined in section 4(2) of the Act. The computation of gratuity is based on the number of completed years of service and the last drawn wages.
Eligibility for gratuity typically depends on the nature of termination of employment, while entitlement to gratuity is determined by the number of completed years of service. In the example provided, although the nature of termination (i.e., "death" while in service) makes the employee eligible for gratuity, his actual service duration of only 3 months (less than a year) in the establishment means he is not entitled to gratuity.
This is why both the Central and various State Rules of Gratuity require the submission of a nomination form for gratuity by an employee who completes one year of service in the same establishment. If the employer chooses to consider the 3-month service as equivalent to one year, they can calculate the gratuity accordingly and provide it to the deceased employee's family along with some ex-gratia payment.
From India, Salem
However, in cases of death or disablement due to accident or disease, the first proviso to section (1) of Sec. 4 explicitly states that no minimum qualifying service is required. Therefore, gratuity must be calculated based on the actual service rendered by the employee on the date of his death or disablement, following the formula outlined in section 4(2) of the Act. The computation of gratuity is based on the number of completed years of service and the last drawn wages.
Eligibility for gratuity typically depends on the nature of termination of employment, while entitlement to gratuity is determined by the number of completed years of service. In the example provided, although the nature of termination (i.e., "death" while in service) makes the employee eligible for gratuity, his actual service duration of only 3 months (less than a year) in the establishment means he is not entitled to gratuity.
This is why both the Central and various State Rules of Gratuity require the submission of a nomination form for gratuity by an employee who completes one year of service in the same establishment. If the employer chooses to consider the 3-month service as equivalent to one year, they can calculate the gratuity accordingly and provide it to the deceased employee's family along with some ex-gratia payment.
From India, Salem
There are several organizations (many PSUs like BHEL) that have a voluntary welfare facility of giving three months' salary in the event of death while in service before completion of five years of service as gratuity. This is entirely within the discretion of the employer to provide any such amount before completion of 240 days of service, as is the case here.
From India, Mumbai
From India, Mumbai
In continuation of the discussion on the trend indicated by Mr. KKHR, I have come to understand that LIC has introduced a special gratuity insurance policy with life cover until the insured employees' retirement date. This policy aims to ensure that full gratuity is paid on the predetermined normal retirement date, even in the unfortunate event of the insured employees passing away before their actual retirement date.
Individuals who have opted for this special gratuity insurance policy are encouraged to share the specifics for the benefit of others.
From India, Salem
Individuals who have opted for this special gratuity insurance policy are encouraged to share the specifics for the benefit of others.
From India, Salem
Dear Learned Members,
All discussion on Gratuity revolves around the issue of whether an employee has served 5 years or not with the employer. In the current scenario, it is very common for an employee to switch jobs before the 5-year period. Over a career of 20 or more years, many employees may have switched jobs numerous times, thus denying them the benefit of gratuity with each individual employer. The employee ends up with no gratuity benefit even after working for so many years.
Is there any mechanism whereby this accrued benefit can be transferred to the next employer so that at the end of an employee's working life, they receive some benefit from a long career? Just thinking aloud!
From India, Kochi
All discussion on Gratuity revolves around the issue of whether an employee has served 5 years or not with the employer. In the current scenario, it is very common for an employee to switch jobs before the 5-year period. Over a career of 20 or more years, many employees may have switched jobs numerous times, thus denying them the benefit of gratuity with each individual employer. The employee ends up with no gratuity benefit even after working for so many years.
Is there any mechanism whereby this accrued benefit can be transferred to the next employer so that at the end of an employee's working life, they receive some benefit from a long career? Just thinking aloud!
From India, Kochi
I would like to comment on Mr. Umakantan's observation. You are correct regarding the LIC coverage. If the company has taken LIC coverage for their gratuity fund, then the deceased employee's nominee in question would have received his gratuity amount till his actual date of retirement, irrespective of the number of years he has served in the organization.
From India, Mumbai
From India, Mumbai
Further to the posts of Mr. Umakanthan and Mr. Shashikumar Nair, I would like to add that my organization is presently in the process of renewal of LIC Group Gratuity Cash Accumulation Plan. In the renewal notice, LIC has intimated that the default quote will be generated based on:
a) Upward revision of Gratuity from 10L to 20L.
b) Life Cover of Rs. 20L.
The company has the following options for renewal:
a) Reduce gratuity ceiling for LIC Policy below 20L with an undertaking that any shortfall in gratuity benefit will be fulfilled by the company.
b) Limit the Life cover to any desired amount less than 20L (again with a signed letter by the company).
From the post of Mr. Shashikumar Nair, I understand that the life cover is basically to ensure gratuity payout to the beneficiaries in case of the death of the employee, even if he is not eligible for gratuity (less than 5 years of service). Am I right?
What will be the payout from LIC GGCA Plan in case the employee dies after serving more than 5 years (eligible for gratuity)? Will his nominee get the gratuity due to him as of the date of his death PLUS the life insurance cover? Or will it be ONLY the gratuity amount due to him as if he had retired on the due date?
I have asked these clarifications from LIC but am yet to get a reply. I shall update this post as and when I get a reply. However, members may please advise based on their own experience.
Thanks
From India, Kochi
a) Upward revision of Gratuity from 10L to 20L.
b) Life Cover of Rs. 20L.
The company has the following options for renewal:
a) Reduce gratuity ceiling for LIC Policy below 20L with an undertaking that any shortfall in gratuity benefit will be fulfilled by the company.
b) Limit the Life cover to any desired amount less than 20L (again with a signed letter by the company).
From the post of Mr. Shashikumar Nair, I understand that the life cover is basically to ensure gratuity payout to the beneficiaries in case of the death of the employee, even if he is not eligible for gratuity (less than 5 years of service). Am I right?
What will be the payout from LIC GGCA Plan in case the employee dies after serving more than 5 years (eligible for gratuity)? Will his nominee get the gratuity due to him as of the date of his death PLUS the life insurance cover? Or will it be ONLY the gratuity amount due to him as if he had retired on the due date?
I have asked these clarifications from LIC but am yet to get a reply. I shall update this post as and when I get a reply. However, members may please advise based on their own experience.
Thanks
From India, Kochi
Mr. Arun - The nominee of the deceased will receive gratuity from his date of joining until the actual date of retirement. There will be no separate LIC cover over and above the actual gratuity amount paid.
From India, Mumbai
From India, Mumbai
Sir,
As per the provisions of the Payment of Gratuity Act, the liability of the employer is limited to the payment of gratuity for the period from the date of joining to the date of death. However, there is a chance to cover the liability from the date of joining to the actual date of retirement by paying some extra premium.
N. Lokanadha Babu
From India, Guntur
As per the provisions of the Payment of Gratuity Act, the liability of the employer is limited to the payment of gratuity for the period from the date of joining to the date of death. However, there is a chance to cover the liability from the date of joining to the actual date of retirement by paying some extra premium.
N. Lokanadha Babu
From India, Guntur
Gratuity is compulsory for those staff who have completed 5 years (240 days in a year) during his/her tenure. Before this time, he/she is not eligible for gratuity. Staff who have completed only 3 months of his/her service are not eligible for the same.
From India, Delhi
From India, Delhi
Dear Rajniverma,
You are requested to kindly read the query once again. You are also requested to kindly read Section 4(1) of the PoG Act, which is given below verbatim, and then provide an appropriate answer to the query.
Section 4(1): 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,
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his 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.
From India, Mumbai
You are requested to kindly read the query once again. You are also requested to kindly read Section 4(1) of the PoG Act, which is given below verbatim, and then provide an appropriate answer to the query.
Section 4(1): 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,
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his 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.
From India, Mumbai
Dear Friends,
Please go through my posts in the below-given link to understand how the gratuity insurance policy is important, even though the same is not made mandatory except in AP & Telangana.
https://www.citehr.com/445918-gratui...-accident.html
From India, Mumbai
Please go through my posts in the below-given link to understand how the gratuity insurance policy is important, even though the same is not made mandatory except in AP & Telangana.
https://www.citehr.com/445918-gratui...-accident.html
From India, Mumbai
Dear Mr. Sashikumar,
When one takes a GGCP (Group Gratuity Cash Accumulation Plan) from LIC, it has two components:
a) Gratuity Liability
b) Future Service Gratuity Liability (which, in their quote, was mentioned as "Life Cover")
Essentially, LIC is covering their risk of having to pay 20L gratuity in case of death in service by providing a Life Cover of the same amount and charging a premium from the employer. I have attached a PDF based on the quote received by us and my understanding of this Life Cover issue. LIC's use of the term "Life Cover" creates confusion.
Regards,
Arun
From India, Kochi
When one takes a GGCP (Group Gratuity Cash Accumulation Plan) from LIC, it has two components:
a) Gratuity Liability
b) Future Service Gratuity Liability (which, in their quote, was mentioned as "Life Cover")
Essentially, LIC is covering their risk of having to pay 20L gratuity in case of death in service by providing a Life Cover of the same amount and charging a premium from the employer. I have attached a PDF based on the quote received by us and my understanding of this Life Cover issue. LIC's use of the term "Life Cover" creates confusion.
Regards,
Arun
From India, Kochi
Dear Seniors, Please confirm me if the employees will resign job after 2 years so he is applicable for Gratuity please revert to us also tell me in case of death.
From India, undefined
From India, undefined
In case of death, at least a minimum of 1 year of service should be required. The same is applicable even if the Gratuity Policy is taken from LIC. LIC will also pay as per the Gratuity Act.
So in the case of death after 3 months of joining the service, no eligibility arises for Gratuity.
From India, Lucknow
So in the case of death after 3 months of joining the service, no eligibility arises for Gratuity.
From India, Lucknow
The qualifying service of 5 years is not required in the case of termination of service due to death. However, the person should have put in at least one year of service; otherwise, the calculation itself is not possible. I would suggest calculating gratuity for the minimum period, i.e., one year, in cases like the present one as a good gesture.
From India, Madras
From India, Madras
Dear All seniors As per my knowledge, Five years is not bounded as Accident case or death case. All condition remove in death cases.
From India, Pune
From India, Pune
Dear estimable s pls confirm can we made gratuity on last drawn basic salary or we would make it on last drawn net salary
Dear KK!HR,
I would appreciate it if you could provide the section verbatim that specifies how the gratuity is to be calculated based on the aggregate of basic pay and DA.
Thank you.
From India, Mumbai
I would appreciate it if you could provide the section verbatim that specifies how the gratuity is to be calculated based on the aggregate of basic pay and DA.
Thank you.
From India, Mumbai
In case of death of employee with less than 1 year service,NOK will get 2 times Basic pay as gratuity.
From India, Pune
From India, Pune
Sir, Section 4(2) of the Payment of Gratuity Act (PGA) states that the employer shall pay gratuity at the rate of fifteen days' wages for every completed year of service. Section 2(s) defines wages as ".... and includes dearness allowance but does not include ......".
Please let me know if you need any further clarification on these provisions.
From India, Mumbai
Please let me know if you need any further clarification on these provisions.
From India, Mumbai
Dear KK!HR,
I read Section 4(2) and Section 2(s) again this morning and found nowhere is it mentioned that gratuity is to be calculated on the aggregate of basic pay and DA. I am wondering nowadays, reading various posts not only on this site but elsewhere too, if I am really making mistakes in understanding the basics of laws.
What is written in Section 4(2) is reproduced hereunder: "...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." I feel the meaning of the rate of wages last drawn is different from "aggregate" as you said. Please correct me if I am wrong. In fact, it is not appropriate on my part to cross a person like you, who is a Super Moderator. I am sorry for this.
From India, Mumbai
I read Section 4(2) and Section 2(s) again this morning and found nowhere is it mentioned that gratuity is to be calculated on the aggregate of basic pay and DA. I am wondering nowadays, reading various posts not only on this site but elsewhere too, if I am really making mistakes in understanding the basics of laws.
What is written in Section 4(2) is reproduced hereunder: "...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." I feel the meaning of the rate of wages last drawn is different from "aggregate" as you said. Please correct me if I am wrong. In fact, it is not appropriate on my part to cross a person like you, who is a Super Moderator. I am sorry for this.
From India, Mumbai
Dear Shri Keshav,
Sec 2 of Payment of gratuity act defines wages
wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
Gratuity calculators available on the internet work out Gratuity like in this link
Gratuity Formula for Calculation of Gratuity Amount in India
But many of the other calculators take Basic pay +DA as the base for working out.
From India, Pune
Sec 2 of Payment of gratuity act defines wages
wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
Gratuity calculators available on the internet work out Gratuity like in this link
Gratuity Formula for Calculation of Gratuity Amount in India
But many of the other calculators take Basic pay +DA as the base for working out.
From India, Pune
Dear Nathrao ji,
The calculation provided in the link is absolutely correct. However, I do not rely on any link or Google search for information.
The link clearly states that the last drawn wages, which I also mentioned. The last drawn wages are not determined by the "aggregate." The term "aggregate" is very vague and does not specify the period for aggregation.
Thank you.
From India, Mumbai
The calculation provided in the link is absolutely correct. However, I do not rely on any link or Google search for information.
The link clearly states that the last drawn wages, which I also mentioned. The last drawn wages are not determined by the "aggregate." The term "aggregate" is very vague and does not specify the period for aggregation.
Thank you.
From India, Mumbai
Dear Mr Keshav, Thanks for the clarification. I also do not rely on Google search, but on search and reading of original enactments and court rulings.
From India, Pune
From India, Pune
Dear All,
As per Section 4(1), gratuity is a gift to an employee by an employer for rendering continuous service of not less than five years, and they will receive this gratuity after the completion of services, such as resignation, retirement, superannuation, death, and disablement. However, in the case of death and disablement, the provision of continuous service is not applicable; the employee is entitled to gratuity.
From India, Jaipur
As per Section 4(1), gratuity is a gift to an employee by an employer for rendering continuous service of not less than five years, and they will receive this gratuity after the completion of services, such as resignation, retirement, superannuation, death, and disablement. However, in the case of death and disablement, the provision of continuous service is not applicable; the employee is entitled to gratuity.
From India, Jaipur
Dear All,
The calculation of Gratuity under the Act is as follows: Basic + DA/26 days x number of service days/years. All allowances except house rent allowance become part of the basic wage if the allowance is earned by all employees while on duty, leave, holiday, and on a rest day.
Prithvi Singh Yadav CEO Newerahr Management Consultancy GGN (HR)
From India, New Delhi
The calculation of Gratuity under the Act is as follows: Basic + DA/26 days x number of service days/years. All allowances except house rent allowance become part of the basic wage if the allowance is earned by all employees while on duty, leave, holiday, and on a rest day.
Prithvi Singh Yadav CEO Newerahr Management Consultancy GGN (HR)
From India, New Delhi
Hi, In death cases, If employee has worked in company at-least above 180 day, his/her nominee is eligible to claim for gratuity.
From India, Bangalore
From India, Bangalore
Dear Vikas.R,
Can you please provide the relevant section or any other valid documentary proof to support your statement? It may be your interpretation. I am not saying it is wrong. When calculating gratuity, we ignore the year if an employee has worked less than 6 months. In the case of 6 months or more, we consider the full year.
If this logic is applied, then working for less than 180 days, i.e., 6 months, would mean we can ignore the gratuity. But how much will you save for your company?
Thank you.
From India, Mumbai
Can you please provide the relevant section or any other valid documentary proof to support your statement? It may be your interpretation. I am not saying it is wrong. When calculating gratuity, we ignore the year if an employee has worked less than 6 months. In the case of 6 months or more, we consider the full year.
If this logic is applied, then working for less than 180 days, i.e., 6 months, would mean we can ignore the gratuity. But how much will you save for your company?
Thank you.
From India, Mumbai
In this case, he might be paid considering 3 months service as one year with some ex-gratia to help the deceased family upto some extent.
From India, Varanasi
From India, Varanasi
Hi,
There is no hard and fast rule that gratuity shall be payable after 6 months in a death case. However, in most companies, after a 6-month duration is counted for eligibility for the payment of gratuity. Gratuity eligibility in a death case is totally based on the company or gratuity provider management's discretion to count for payment for employees with less than 6 months of service duration.
Thank you.
From India, Bangalore
There is no hard and fast rule that gratuity shall be payable after 6 months in a death case. However, in most companies, after a 6-month duration is counted for eligibility for the payment of gratuity. Gratuity eligibility in a death case is totally based on the company or gratuity provider management's discretion to count for payment for employees with less than 6 months of service duration.
Thank you.
From India, Bangalore
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