My employee in Jalandhar 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 employee's last drawn salary and the duration of their service, and it is payable under specific conditions as outlined in the Payment of Gratuity Act, 1972.

According to the Payment of Gratuity Act, 1972, gratuity is a statutory benefit payable to employees who have rendered continuous service for at least five years. Here are the key points regarding gratuity calculation and payment:

• Eligibility Criteria:
  • The employee must have completed a minimum of five years of continuous service.
  • Gratuity is payable upon retirement, resignation, or termination of employment (except for 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' includes basic salary and dearness allowance.
  • The factor 15/26 is derived from the average number of working days in a month (assuming 26 working days).
• Payment Timeline:
  • Gratuity is to be paid within 30 days from the date of resignation or termination.
  • If the payment is delayed, the employer is liable to pay interest at the rate of 10% per annum.
• Dispute Resolution:
  • If there is a dispute regarding eligibility or the amount, the employee can file an application with the controlling authority under the Payment of Gratuity Act.
  • The authority will investigate the claim and provide a ruling, which can be challenged in the appropriate court if necessary.

In conclusion, ensure that you thoroughly review the employee's service duration, salary details, and the conditions under which gratuity is applicable, as stipulated under the Payment of Gratuity Act, 1972. If the employee meets the eligibility requirements, gratuity must be paid accordingly.