If an employee dies before completing 5 years of service, the rule of 5 years of service does not apply. In such a situation, the employee’s nominee gratuity amount is given. But gratuity is calculated differently.
There is a rule of gratuity that when you have worked in an organization for 5 years, then you become entitled to receive gratuity. Gratuity amount is a reward for providing good services to any company for a long time. But if an employee dies before completing 5 years of service, then the rule of 5 years of service does not apply. In such a situation, the employee’s nominee gratuity amount is given. While joining the job, you can register the name of the nominee for your gratuity amount by filling Form F. But in case of death, the method of calculating the amount of gratuity changes. Let us tell you about this.
Calculation based on job duration
According to the Gratuity Act 1972, if an employee dies due to an accident, his dependents or nominees can claim the gratuity amount. In this situation the 5 year rule does not apply. At the same time, if an employee becomes disabled in an accident during the job and is unable to work again, he can still claim the gratuity amount. But in both these situations the amount of gratuity is not calculated by the normal formula of gratuity calculation. In such a situation, calculation is done on the basis of duration of job.
This is how the amount is calculated
- In case of employment for less than 1 year, double the amount of basic salary is given as gratuity.
- For more than 1 year but less than 5 years, 6 times the basic salary is given.
- For more than 5 years but less than 11 years, 12 times the basic salary is given.
- If the age is more than 11 years but less than 20 years, up to 20 times the basic salary is given as gratuity.
- Those working for 20 years or more are given 33 times their basic salary.
This is how gratuity is generally calculated
Generally, there is a fixed formula to decide the amount of gratuity. This formula is – (final salary) x (number of years worked in the company) x (15/26). Last salary means the average of your last 10 months’ salary. Basic salary, dearness allowance and commission are included in this salary. Due to 4 Sundays being week off in a month, 26 days are counted and gratuity is calculated on the basis of 15 days.
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