My employee in Bhavnagar 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, after they have completed a minimum of five years of continuous service, and is calculated based on the employee's last drawn salary and the duration of service.

Here’s how gratuity is calculated and the conditions under which it is payable:

• Eligibility Criteria:
  • The employee must have completed at least five years of continuous service with the employer.
  • This period may include service in multiple companies if they are under the same management.
  • Exceptions apply for employees who retire, are disabled, or die while in service, in which case gratuity is payable regardless of their service duration.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Here, "Last drawn salary" includes basic pay plus dearness allowance (DA).
  • 15 days of salary is used for each completed year of service; the factor of 26 represents the number of working days in a month (considering 6 working days per week).
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date it becomes payable.
  • If the employer fails to make the payment in time, interest may be charged as per Section 7(3) of the Payment of Gratuity Act, 1972.
• Application Process:
  • The employee should submit a written application for gratuity to the employer.
  • The employer is obligated to verify the application and calculate the gratuity amount.
  • If the employer disputes the claim, the employee can appeal to the Controlling Authority under the Payment of Gratuity Act.

In case of disputes regarding eligibility or calculation, it is advisable to consult the provisions under the Payment of Gratuity Act, 1972, particularly Sections 4, 7, and 8, which govern the payment and settlement of gratuity claims.