My employee in Dhanbad 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 the provisions of the Payment of Gratuity Act, 1972, and is payable to employees who have completed a minimum of five years of continuous service with an employer.

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

• Eligibility Criteria:
  • An employee is eligible for gratuity if they have completed a minimum of five years of continuous service.
  • Gratuity is payable upon resignation, retirement, or termination due to any reason other than misconduct.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service.
  • Here, "Last drawn salary" refers to the basic salary plus dearness allowance (if applicable).
  • 15 represents the number of days for which gratuity is calculated for each completed year of service, and 26 represents the number of working days in a month.
• Timeframe for Payment:
  • Gratuity must be paid within 30 days of the employee's resignation or retirement, as per Section 7 of the Payment of Gratuity Act, 1972.
  • In case of any dispute regarding eligibility or amount, the payment may be delayed, but the employer must provide a clear justification for the delay.
• Dispute Resolution:
  • If there is a dispute regarding gratuity, the employee can approach the controlling authority under the Act, as specified in Section 8.
  • The controlling authority will conduct an inquiry and issue a decision which can be challenged in a higher forum if required.

It is important for employers in Dhanbad to maintain accurate records of employee service duration and salary to ensure compliance with the Payment of Gratuity Act, 1972, and to avoid disputes regarding gratuity claims.