My employee in Bengaluru 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 calculated based on the provisions of the Payment of Gratuity Act, 1972, and it is payable to an employee upon termination of employment after completing a minimum of five years of continuous service.

Key points regarding gratuity calculation and eligibility include:

• Eligibility: An employee is entitled to gratuity if they have worked for at least 5 years in the same organization. The calculation of service duration may include periods of maternity leave and certain other sanctioned leaves.
• Calculation of Gratuity: The formula for calculating gratuity is:
• For employees covered under the Payment of Gratuity Act: Gratuity = (Last drawn salary × 15/26) × Number of years of service
• Last drawn salary includes basic pay plus dearness allowance.
• The factor of 15/26 is based on the assumption that a month consists of 26 working days, where 15 days of salary is considered for each completed year of service.
• Payment Timeline: Gratuity must be paid within 30 days of the date it becomes payable, which is typically the date of resignation, termination, or retirement. If delayed, the employer may face interest charges under Section 7(3) of the Act.
• Exemptions: Gratuity may not be payable if the termination is due to misconduct or if the employee resigns before completing 5 years of service, as per Section 4(1) of the Act.

Additionally, in case of disputes regarding eligibility or calculation, the employee can file a claim with the controlling authority specified under the Payment of Gratuity Act. The authority will examine the claim and make a determination based on the facts and applicable law.

It is essential for employers to maintain accurate records of employment duration and salary to facilitate fair gratuity calculations. In Bengaluru, it is advisable to consult with a legal expert familiar with local labour laws to ensure compliance and proper handling of gratuity claims.