My employee in Agra has claimed gratuity after resignation but my company is disputing the eligibility; how is gratuity calculated and when is it payable?

Detailed Legal Analysis

Gratuity is payable to an employee in India upon resignation if they meet certain eligibility criteria as stipulated under the Payment of Gratuity Act, 1972.

According to the Act, an employee is entitled to gratuity if they have completed a minimum of five years of continuous service with the employer. The gratuity amount is calculated based on the employee's last drawn salary and the duration of their service.

The calculation of gratuity is done as follows:

• Gratuity = (Last Drawn Salary × 15/26) × Number of Years of Service
• Last Drawn Salary includes basic salary, dearness allowance, and any other components of the salary that may be considered as per the employment contract.
• The factor of 15/26 is used because the Act considers 15 days of wages for each completed year of service, and there are typically 26 working days in a month.

Gratuity becomes payable when the employee leaves the organization under the following conditions:

• Retirement
• Resignation after completing five years of continuous service
• Death or disablement due to accident or disease
• Termination of service (except for misconduct)

It is important to note that if the employee has resigned before completing five years, they are not entitled to any gratuity under Section 4 of the Payment of Gratuity Act, 1972. Additionally, if the employee's resignation is due to misconduct, the employer may contest the payment of gratuity.

Employers are required to process gratuity claims within 30 days of the application under Section 7 of the Act. If the employer disputes the claim, they must provide a valid reason for the dispute and should be prepared to present evidence supporting their claim.

In case of disputes regarding the gratuity claim, the employee can approach the Controlling Authority as defined under the Act, who will adjudicate the matter. Legal recourse can also be taken under Section 7(7) of the Act, which allows the employee to file an appeal against the employer's decision.

In summary, ensure that you assess the employee's eligibility based on their length of service and the circumstances of their resignation to determine the correct gratuity calculation and payment obligations.