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

Detailed Legal Analysis

The payment of gratuity to an employee in Aurangabad is governed by the Payment of Gratuity Act, 1972, which stipulates the eligibility criteria, calculation method, and the circumstances under which gratuity is payable.

According to the Act, an employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the same employer. The key points regarding gratuity calculation and payment are as follows:

• Eligibility Criteria:
  • The employee must have completed at least five years of continuous service.
  • Gratuity is payable upon termination of service due to resignation, retirement, or death/disability.
  • In cases of death, the gratuity is payable to the nominee or legal heir, regardless of the duration of service.
• Calculation of Gratuity:
  • Gratuity is calculated as follows:

    Gratuity = (Last drawn salary x 15/26) x Number of years of service

    Where "Last drawn salary" includes basic pay and dearness allowance (DA).

  • The factor of 15/26 is used as it is based on a 26 working day month.
  • For employees with less than five years of service, gratuity is not payable unless it is due to death or disablement.
• Timeframe for Payment:
  • Gratuity should be paid within 30 days from the date it becomes payable.
  • If the employer fails to pay gratuity within the stipulated time, they may be liable to pay interest at the rate of 10% per annum.
• Dispute Resolution:
  • If there is a dispute regarding eligibility or amount, the employee can file an application before the Controlling Authority under the Payment of Gratuity Act.
  • The employer may also contest the claim before the same authority.

In summary, ensure that you review the employee's length of service, the reason for resignation, and the calculation of gratuity based on their last drawn salary. The provisions of the Payment of Gratuity Act, 1972, particularly Sections 4 and 7, will guide you in determining the rightful payment of gratuity.