My employee in Navi Mumbai 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 per the Payment of Gratuity Act, 1972.

In India, gratuity is a monetary benefit given to employees for their service upon termination, resignation, retirement, or death. The Payment of Gratuity Act, 1972 governs this provision. Here are the key points regarding eligibility, calculation, and payment:

• Eligibility: An employee is entitled to gratuity if they have completed at least five years of continuous service in an organization, as per Section 4 of the Payment of Gratuity Act, 1972. However, this condition does not apply in cases of death or disablement.
• Calculation of Gratuity: Gratuity is calculated using the formula:
  • Gratuity = (Last drawn salary × 15/26) × Number of years of service
  Here, the last drawn salary includes basic pay and dearness allowance (DA).
• Last Drawn Salary: This refers to the average monthly salary received by the employee in the last 10 months of service.
• Continuous Service: Continuous service is defined under Section 2A of the Act, which states that service of an employee is considered continuous unless interrupted by a break in service that is not more than 30 days.
• Payment Timeline: Gratuity should be paid within 30 days from the date it becomes payable. If not paid within this period, the employer is liable to pay interest on the amount due as stipulated under Section 7(3) of the Act.
• 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, 1972. The authority will adjudicate the matter, and an appeal can be made to the appropriate appellate authority if needed.

Therefore, if your employee has completed five years of continuous service and has made a valid claim for gratuity, your company is obligated to comply with the requirements as per the Payment of Gratuity Act, 1972.