My employee in Chennai 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 certain conditions as stipulated by the Payment of Gratuity Act, 1972.

In India, the Payment of Gratuity Act, 1972 governs the payment of gratuity to employees in establishments with ten or more employees. Here are the key points regarding gratuity calculation and eligibility:

• Eligibility for Gratuity: An employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the employer. This applies to both permanent and contract employees.
• Calculating Gratuity: The formula for calculating gratuity is as follows:
• Gratuity = (Last drawn salary × 15/26) × Number of years of service
• Where the last drawn salary is the sum of basic pay and dearness allowance.
• The factor 15/26 is used as it assumes an employee works for 15 days a month.
• When is Gratuity Payable? Gratuity becomes payable under the following conditions:
• Upon retirement or superannuation.
• On termination of service after five years of continuous employment.
• In case of death or disablement due to accident or disease.
• Disputing Gratuity Claims: If an employer disputes a gratuity claim:
• Provide evidence of the employee's tenure and conduct during employment.
• Document any reasons for termination or resignation that may affect eligibility.
• Employers can file an appeal with the controlling authority within 90 days of receiving a gratuity claim.
• Legal Framework: The relevant provisions can be found under:
• Payment of Gratuity Act, 1972 - Sections 4 (Payment of Gratuity), 7 (Determination of the amount of gratuity), and 8 (Nomination).

It is advisable to consult with a legal professional for specific cases, especially when disputing gratuity claims, to ensure compliance with all legal requirements and avoid penalties.