My employee in Gorakhpur 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 duration of service and the last drawn salary of the employee, and it becomes payable under certain conditions as stipulated in the Payment of Gratuity Act, 1972.

The Payment of Gratuity Act, 1972 (hereinafter referred to as the "Act") governs the payment of gratuity to eligible employees in India. Below are the key points regarding the calculation and eligibility for gratuity:

• Eligibility for Gratuity:
  • An employee must have completed a minimum of five years of continuous service with the employer.
  • Gratuity is payable upon resignation, termination, or retirement, provided the five-year criterion is met.
  • In the case of death or disability of the employee, gratuity is payable irrespective of the duration of service.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: (Last drawn salary × 15/26) × Number of years of service.
  • Last drawn salary includes basic salary and dearness allowance (if applicable).
  • The calculation is based on the number of days in a month, which is considered as 26 working days.
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date it becomes payable.
  • If there is a dispute regarding eligibility, the employer must still process the gratuity application and may contest the claim later.
• Dispute Resolution:
  • If the employer disputes the gratuity claim, they must provide adequate reasons for the denial.
  • Disputes can be filed with the controlling authority under the Act, and the aggrieved employee can appeal against the decision.
• Relevant Sections of the Act:
  • Section 4: Provides the right to gratuity.
  • Section 7: Discusses the determination of the amount of gratuity.
  • Section 8: Covers the payment of gratuity.
  • Section 9: Addresses forfeiture of gratuity under specific circumstances.

In summary, if your employee has completed five years of continuous service, they are eligible for gratuity, and you must calculate it based on the specified formula, ensuring timely payment unless a valid dispute arises.