My employee in Bilaspur 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 an employee's last drawn salary and the duration of their service, and it is payable under the Payment of Gratuity Act, 1972, provided certain conditions are met.

In India, the Payment of Gratuity Act, 1972 applies to establishments with ten or more employees and mandates the payment of gratuity to employees who have completed at least five years of continuous service with the same employer. Here are the key points regarding gratuity calculation and eligibility:

• Eligibility Criteria:
  • The employee must have completed a minimum of five years of continuous service.
  • Gratuity is payable upon termination of employment due to resignation, retirement, or death.
  • In case of resignation, the employee must have served for five years or more to be eligible.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last Drawn Salary × 15/26) × Number of Years of Service.
  • Last Drawn Salary includes Basic Salary + Dearness Allowance (if any).
  • The '15/26' factor is used as an employee is considered to have worked for 15 days in a month for every completed year of service, over a 26-day working month.
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date of resignation or termination of employment.
  • In case of delay, the employer may be liable to pay interest as specified under Section 7(3) of the Payment of Gratuity Act, 1972.
• Disputes and Claims:
  • If an employer disputes the gratuity claim, the employee can approach the controlling authority under the Act for adjudication.
  • Section 8 of the Payment of Gratuity Act, 1972 provides for the determination of the amount of gratuity by the authority.

In summary, ensure that you validate the employee's duration of service and calculate the gratuity accordingly. If there are any disputes, it is advisable to seek legal counsel to address the issue under the provisions of the Payment of Gratuity Act, 1972.