My employee in Patna 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 provisions of the Payment of Gratuity Act, 1972, and is payable to employees upon resignation after fulfilling specific eligibility criteria.

Here are the key points regarding gratuity calculation and eligibility:

• Eligibility Criteria:
  • According to Section 4 of the Payment of Gratuity Act, an employee must have completed at least five years of continuous service to be eligible for gratuity.
  • Exceptions to this rule exist for cases of death or disablement, where gratuity is payable regardless of the tenure of service.
  • The employee must be in permanent employment; casual workers or those on fixed-term contracts are generally not eligible.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Here, the last drawn salary refers to the basic pay plus dearness allowance.
  • The factor of 15/26 is based on the assumption that an employee works for 26 days a month.
  • For example, if an employee's last drawn salary is ₹30,000 and they have worked for 10 years, the gratuity would be: (₹30,000 × 15/26) × 10 = ₹173,076.92
• Payment Timeline:
  • According to Section 7 of the Payment of Gratuity Act, the gratuity amount must be paid within 30 days from the date it becomes payable.
  • If there is a dispute regarding eligibility, the employer must provide a written explanation to the employee within this period.
• Dispute Resolution:
  • In case of disputes, the employee may file a claim before the controlling authority under the Payment of Gratuity Act, as per Section 8.
  • Employers can challenge such claims in accordance with the provisions laid out in the Act.

In summary, ensure that the employee meets the five-year service requirement and verify the calculation based on the last drawn salary for proper compliance with the Payment of Gratuity Act, 1972.