Payment of gratuity act,1972

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Ronak Sejpal (Querist)
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13 August 2012 As per section 4, gratutity is payable to employees after 5 years of continuous employment. However this continuous period of 5 years is not applicable in case of termination of employment of employee due to death/disablement.
Section 4 (2) quotes the following "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"

Kindly suggest at what rate the gratuity, would be payable to an employee whose employment is terminated due to death and when the employee has not completed six months of service in the organisation?

Amol S Joglekar

Amol S Joglekar (Expert)
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15 August 2012 what is the period of service? less than 6 months OR 5years and less than 6 months?

Ronak Sejpal

Ronak Sejpal (Querist)
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16 August 2012 The period of service is less than 6 months. At what rate should gratuity be paid if any??

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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09 August 2024 Under the **Payment of Gratuity Act, 1972**, gratuity is generally payable to employees who have completed at least 5 years of continuous service with the employer. However, gratuity is also payable to employees who leave the organization due to death or disablement, regardless of the length of service.

### **Gratuity Payable on Termination Due to Death**

**Section 4(2)** of the Payment of Gratuity Act specifies:

- **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.

**If the employee's service is less than 6 months:**

- **Gratuity in Case of Death or Disablement**: The gratuity is payable even if the employee has not completed 5 years of service due to death or disablement.

### **Rate of Gratuity Payable for Service Less Than 6 Months**

- **Under Section 4(2)**: If the period of service is less than 6 months, the employee is still entitled to gratuity, provided they are leaving due to death or disablement. The gratuity payable will be calculated as follows:

- **For less than 6 months of service**, the employee will be eligible for gratuity if they are leaving due to death or disablement. The amount payable would be **proportional** to the period of service rendered.

- **Calculation Formula**:
- **For each completed year of service** or part thereof in excess of 6 months, the gratuity amount is computed as **15 days' wages** based on the last drawn wage.

- **If service is less than 6 months**, and assuming the employee has completed at least one month of service, the calculation is generally based on the principle of **15 days' wages for each completed month of service**.

- **Example Calculation**:
- **If an employee worked for 4 months and is entitled to gratuity**, the calculation would be:
- Monthly wages: ₹30K (as an example).
- Gratuity payable = (15 days / 30 days) * ₹30K * 4 months of service.
- Gratuity = ₹15K * 4 = ₹60K

**Points to Note:**

1. **Immediate Payment**: In case of death or disablement, the employer must process and pay the gratuity immediately upon termination of employment.

2. **Exemption for 5 Years Rule**: The 5-year rule is not applicable in cases of death or disablement, so the employee or their family is entitled to receive gratuity even if the tenure is less than 5 years.

3. **Legal Compliance**: Ensure compliance with the latest amendments and relevant state laws as there might be variations or additional provisions in different states.

**Further Advice:**

For accurate calculation and adherence to legal requirements, it is recommended to consult with a legal advisor or HR professional experienced in employment laws and gratuity payments.

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