My employee in Madurai 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 payable to an employee in India under certain conditions as stipulated by the Payment of Gratuity Act, 1972, and is calculated based on the employee's last drawn salary and the duration of their service.

According to the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the employer. Here are the key points regarding gratuity calculation and payment:

• Eligibility Criteria:
  • The employee must have rendered at least five years of continuous service.
  • Resignation or termination due to any reason other than misconduct qualifies for gratuity.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Here, "Last drawn salary" refers to the employee's basic salary plus dearness allowance.
  • 15 is the number of days of wages for each completed year of service, and 26 is considered the number of working days in a month.
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date it becomes payable.
  • If the employer delays the payment, they may be liable to pay interest at the rate of 10% per annum.
• Dispute Resolution:
  • If there is a dispute regarding gratuity entitlement, the employee can file an application with the controlling authority under the Payment of Gratuity Act.
  • The authority will then adjudicate the matter and make a necessary order regarding gratuity payment.
• Relevant Legislation:
  • Payment of Gratuity Act, 1972 - Sections 4, 7, and 8 are particularly pertinent to gratuity calculation and payment.
  • The act applies to establishments with 10 or more employees.

In summary, if your employee has completed five years of continuous service, they are eligible for gratuity, which should be calculated based on their last drawn salary and the duration of their service. Disputes regarding eligibility can be addressed through the prescribed legal authority as per the Payment of Gratuity Act, 1972.