My employee in Manali 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 under the Payment of Gratuity Act, 1972, upon resignation or termination after a minimum period of service, provided certain conditions are met.

According to the Payment of Gratuity Act, 1972, the following points outline the eligibility and calculation of gratuity:

• Eligibility: An employee becomes eligible for gratuity if they have completed at least five years of continuous service with the same employer. The five-year condition does not apply in cases of death or disablement.
• Applicable Situations: Gratuity is payable upon resignation, retirement, termination, or death of the employee. In case of resignation, the employee must have served the organization for the requisite period.
• 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 pay and dearness allowance, and '15/26' represents the number of working days in a month considered for payment.
• Salary Definition: As per Section 2(s) of the Act, the term 'salary' includes only basic pay and dearness allowance, excluding other allowances and benefits.
• Timeframe for Payment: Gratuity must be paid within 30 days from the date it becomes payable. If delayed, the employer is liable to pay interest as prescribed under the Act.
• Dispute Resolution: If there is a dispute regarding the gratuity claim, the employee can file an application for claiming gratuity before the controlling authority under the Act, as per Section 7(4).

It is essential for employers to maintain clear documentation of an employee’s tenure and salary details to avoid disputes regarding gratuity claims. If your employee's claim is contested, ensure that you have valid reasons based on their service duration and compliance with the stipulated provisions of the Payment of Gratuity Act, 1972.