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

According to the Act, gratuity is payable to employees when they have completed a minimum of five years of continuous service with the same employer. The calculation of gratuity is based on the following formula:

• Gratuity = (Last drawn salary × 15/26) × Number of years of service

In this formula:

• Last drawn salary: This typically includes basic salary and dearness allowance.
• 15/26: This ratio is used to calculate gratuity for employees who have worked for 15 days in a month, as 26 working days are considered in a month.
• Number of years of service: This is the total number of completed years of service with the employer.

Gratuity becomes payable under the following circumstances:

• Upon resignation or retirement of the employee after completing five years of continuous service.
• In case of death or disablement due to accident or disease, gratuity is payable irrespective of the length of service.
• Termination of service, other than dismissal for misconduct, also qualifies for gratuity if the employee has completed five years of service.

It's important to note that the employer must settle the gratuity payment within 30 days from the date it becomes payable, as per Section 7 of the Payment of Gratuity Act, 1972. If the employer disputes the gratuity claim, the employee can file an application with the controlling authority under the Act for adjudication.

In the case of a dispute regarding eligibility, companies must provide valid reasons for denying the gratuity, ensuring compliance with the provisions of the Act. The controlling authority can be approached under Section 8 if the dispute remains unresolved. Employers should also keep in mind the importance of maintaining proper records of employment duration and salary details to substantiate their claims or disputes regarding gratuity payments.