My employee in Kolkata has claimed gratuity after resignation but my company is disputing the eligibility; how is gratuity calculated and when is it payable?

Detailed Legal Analysis

The calculation and payment of gratuity in India are governed by the Payment of Gratuity Act, 1972, which mandates that eligible employees receive gratuity upon termination of employment under certain conditions.

Gratuity is calculated based on the last drawn salary of the employee and the duration of their service. Here are the key points regarding its calculation and payment:

• Eligibility Criteria: An employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the same employer, as per Section 4 of the Payment of Gratuity Act, 1972.
• Payment Trigger Events: Gratuity is payable upon resignation, retirement, termination, or death of the employee. However, for voluntary resignation, the five-year service requirement must be met.
• Calculation Formula: The formula for calculating gratuity is as follows:
  • Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Here, the "Last drawn salary" includes basic salary and dearness allowance. The "15/26" represents the number of days worked in a month, considering 26 working days.
• Payment Timeline: Gratuity must be paid within 30 days from the date it becomes payable. If there is a delay, the employer may be liable to pay interest as specified in Section 7(3) of the Act.
• Disputes and Claims: In case of disputes regarding gratuity, the employee can file a claim with the controlling authority under the Act. The authority will adjudicate the matter and ensure compliance, as provided under Section 8 of the Act.

It is crucial for employers to maintain proper records of employee service duration and salary structures to ensure accurate gratuity calculations. If your employee has served for five continuous years and meets other eligibility criteria, they are entitled to gratuity. In case of disputes, it may be prudent to seek legal counsel to navigate the claims process effectively.