My employee in Cuttack has claimed gratuity after resignation but my company is disputing the eligibility; how is gratuity calculated and when is it payable?

Detailed Legal Analysis

In India, gratuity is calculated based on the provisions laid out in the Payment of Gratuity Act, 1972, and is payable to employees who meet specific eligibility criteria upon their resignation or termination. Here’s how gratuity is calculated and the conditions under which it is payable:

• Eligibility Criteria: An employee is eligible for gratuity if they have completed at least five years of continuous service with the same employer. This applies to both full-time and part-time employees.
• Calculation of Gratuity: The formula for calculating gratuity is:
  • For employees covered under the Payment of Gratuity Act: Gratuity = (Last drawn salary × 15 × Number of years of service) / 26
  • Where "Last drawn salary" includes basic pay and dearness allowance.
  • The number of years of service is rounded off to the nearest full year.
• Payment Timeline: Gratuity should be paid within 30 days from the date it becomes payable. If not paid on time, the employer may be liable to pay interest as per the provisions of the Act.
• Exemptions: Certain cases where gratuity may not be payable include:
  • If the employee is dismissed for any act of misconduct.
  • Separation due to voluntary retirement before five years of service.
  • In cases where the employee has not completed five years of service.

It is essential for employers to maintain proper records of employees' service duration and salary details to resolve any disputes regarding gratuity. Under Section 4 of the Payment of Gratuity Act, an employee has the right to claim gratuity, and employers are obliged to comply unless there's a valid reason for denial.

In case of disputes, the employee may file an application for gratuity with the controlling authority under the Act, as provided in Section 7 of the Payment of Gratuity Act. This authority will oversee the investigation of claims and ensure fair resolution.