My employee in Aligarh 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 employees under the Payment of Gratuity Act, 1972, and its calculation depends on the employee's length of service and last drawn salary. In cases where eligibility is disputed, it is crucial to understand the criteria for gratuity entitlement and how it is calculated.

According to the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have completed at least five years of continuous service with the employer. The calculation is based on the last drawn salary and the number of years of service. Here are the key points regarding gratuity calculation and eligibility:

• Eligibility:
  • Employees are eligible for gratuity after completing five years of continuous service.
  • Continuous service includes service across different establishments under the same employer.
  • Gratuity is payable even if the employee resigns after five years of service.
• Calculation of Gratuity:
  • The formula for gratuity calculation is: Gratuity = (Last Drawn Salary × 15/26) × Number of Years of Service.
  • Last Drawn Salary includes basic salary and dearness allowance, excluding other allowances.
  • The factor 15/26 is used to account for a month of 26 working days, and the gratuity is calculated based on 15 days' salary for each completed year of service.
• When is Gratuity Payable?
  • Gratuity must be paid within 30 days of the employee’s resignation or termination.
  • If the employer disputes the gratuity claim, they must provide a written explanation to the employee.
  • Disputed claims can be referred to the controlling authority under the Payment of Gratuity Act for resolution.

In case your company disputes the gratuity claim, ensure that you have valid grounds for the dispute. You may also consider seeking legal advice or mediation to resolve issues amicably. Under Section 7 of the Payment of Gratuity Act, the employer must issue a gratuity payment order, and non-compliance can lead to penalties under the Act.