My employee in Bhagalpur 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 duration of employment and the last drawn salary of the employee, and it is payable under the Payment of Gratuity Act, 1972, provided certain conditions are met.

According to the Payment of Gratuity Act, 1972, gratuity is a statutory benefit provided to employees as a reward for their long service. Here are the key points regarding the calculation and payment of gratuity:

• Eligibility: An employee is eligible for gratuity if they have completed a minimum of 5 years of continuous service with the same employer. In cases of death or disability, this requirement does not apply.
• Calculation of Gratuity: The formula for calculating gratuity is:

Gratuity = (Last Drawn Salary × 15/26) × Number of Completed Years of Service

• Last Drawn Salary includes basic salary and dearness allowance.
• 15 days of salary is taken for each completed year of service (assuming a 26 working days month).

For example, if an employee's last drawn salary is ₹30,000 and they have served for 10 years, the gratuity would be:

Gratuity = (30,000 × 15/26) × 10 = ₹173,076.92

• Payment Timeline: The employer is required to pay gratuity within 30 days of the date it becomes payable. Failure to do so can attract interest at the rate of 10% per annum under Section 7(3) of the Act.
• Dispute Resolution: If there is a dispute regarding the eligibility or amount, the employee may file an application with the Controlling Authority under the Act, as stipulated in Section 7(4).
• Tax Exemption: Gratuity received by an employee is exempt from tax up to a limit of ₹20 lakhs, as per the Income Tax Act, 1961.

It is crucial to ensure compliance with the provisions of the Payment of Gratuity Act, 1972, while handling such claims. If you dispute the employee’s eligibility, it is advisable to gather relevant documentation regarding employment duration and roles, and possibly seek legal counsel for resolution of the matter.