My employee in Gandhinagar 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 an employee upon resignation if they meet specific eligibility criteria.

Under the Payment of Gratuity Act, an employee is eligible for gratuity if they have completed at least five years of continuous service with the employer. However, there are exceptions for certain situations such as death or disablement, where the five-year rule does not apply.

The calculation of gratuity is based on the following formula:

• Gratuity = (Last drawn salary × 15/26) × Number of years of service
• Last drawn salary: This includes basic salary and dearness allowance (DA).
• 15/26: This ratio is used as it assumes 15 days of work in a month for gratuity calculation purposes, considering a month generally has 26 working days.

Here are the key points regarding gratuity eligibility and payment:

• Eligibility: An employee must have completed a minimum of five years of continuous service, except in cases of death or disability.
• Application: The employee must apply for gratuity by submitting Form I to the employer.
• Payment Timeline: The employer is required to make the payment within 30 days from the date of receiving the gratuity application, failing which interest may be levied as per Section 7(3) of the Act.
• Dispute Resolution: In case of a dispute regarding gratuity, the employee can file a claim before the Controlling Authority under the Payment of Gratuity Act, as per Section 8.

It is important for employers to maintain proper records of employee service duration and salary details to accurately assess gratuity claims. If your company is disputing the eligibility based on the five-year rule, ensure to evaluate the employee's service duration meticulously, and consider any special circumstances that may apply. If the employee is indeed entitled to gratuity as per the legal provisions, it is advisable to process the claim in compliance with the Payment of Gratuity Act, 1972, to avoid legal repercussions.