My employee in Alwar 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 under the Payment of Gratuity Act, 1972, once they have completed a minimum period of service, and it is calculated based on the employee's last drawn salary and the duration of their service.

Under the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have rendered continuous service for at least five years. The calculation of gratuity is determined by the following formula:

• Gratuity = (Last drawn salary × 15/26) × Number of completed years of service

Here, the "last drawn salary" includes basic pay and dearness allowance, while "15/26" represents the number of days in a month considered for gratuity calculation (15 days for every completed year of service, based on a 26-day work month).

Key points regarding gratuity eligibility and payment include:

• The employee must have completed a minimum of five years of continuous service, except in cases of death or disablement, where gratuity is payable irrespective of the service duration.
• The employer must ensure that they do not deny gratuity without just cause, as stipulated under Section 4 of the Payment of Gratuity Act, 1972.
• Gratuity is payable within 30 days from the date it becomes payable. If not paid on time, the employer is liable to pay simple interest at the rate of 10% per annum from the date it becomes due until the date it is paid, as per Section 7(3) of the Act.

In the event of a dispute regarding eligibility, it is advisable for the employer to review the employee's service records to confirm the length of service and ensure compliance with the Act's provisions. If the employee's claim is found valid, the employer must initiate the payment process to avoid penalties.

For further dispute resolution, an aggrieved employee can approach the controlling authority designated under the Act for seeking payment of gratuity. The authority will review the case based on the evidence presented and make a determination in accordance with the provisions of the Payment of Gratuity Act, 1972.