My employee in Bhopal 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 in India is governed by the Payment of Gratuity Act, 1972, and is calculated based on the employee's last drawn salary and the duration of their service. It is payable when an employee has completed at least five years of continuous service with the employer.

The key points regarding gratuity calculation and eligibility are as follows:

• Eligibility Criteria:
  • An employee must have completed a minimum of five years of continuous service.
  • Gratuity is payable upon resignation, termination, or retirement, provided the five-year condition is met.
  • In cases of death or disablement, gratuity can be claimed irrespective of the duration of service.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Where:
    • Last drawn salary: This includes basic pay + dearness allowance.
    • 15/26: This factor is used as it considers 15 days' wages for every completed year of service, assuming a 26-day work month.
• Payment Procedure:
  • The employer must initiate the payment of gratuity within 30 days from the date of receiving the application for gratuity.
  • If the employer disputes the claim, it must be communicated to the employee in writing, stating the reasons for the dispute.
  • In case of non-payment, the employee can approach the Controlling Authority under the Payment of Gratuity Act for redressal.
• Relevant Provisions:
  • Payment of Gratuity Act, 1972 - Section 4 (Payment of Gratuity), Section 7 (Determination of the amount of gratuity).
  • The Act applies to factories, mines, and establishments with 10 or more employees.

In conclusion, if your employee meets the eligibility criteria and the calculation is done correctly, the gratuity is payable as per the terms set out in the Payment of Gratuity Act, 1972.