My employee in Imphal 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 rendered continuous service for a minimum of five years with the same employer.

The key points regarding the eligibility and calculation of gratuity include:

• Eligibility Criteria:
  • An employee must have completed at least five years of continuous service with the same employer.
  • Gratuity is payable upon resignation, termination, or upon the death or disablement of the employee.
  • Employees who leave due to retirement, redundancy, or illness are also eligible.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary x 15/26) x Number of years of service
    • Last drawn salary includes basic pay and dearness allowance.
    • 15 days' salary is considered for every completed year of service, where '26' refers to the number of working days in a month.
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date it becomes payable.
  • If not paid, the employer may be liable to pay interest at the rate of 10% per annum from the due date until the payment is made.
• Dispute Resolution:
  • If there is a dispute regarding the payment of gratuity, the employee can approach the controlling authority under the Payment of Gratuity Act.
  • The employee may file an application within 90 days from the date the gratuity becomes payable.
  • The authority will conduct an inquiry and issue an order that can be challenged in the appropriate court if required.

The Payment of Gratuity Act, 1972, provides the legal framework governing gratuity payments in India. Employers must adhere to this legislation to avoid disputes and ensure compliance.