My employee in Purnia 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 who have completed a minimum of five years of continuous service with the same employer in India.

According to the Payment of Gratuity Act, 1972, an employee is eligible for gratuity upon resignation if they have completed the requisite service period, and the calculation is based on the following key points:

• Eligibility: An employee must have rendered at least five years of continuous service to be eligible for gratuity.
• Calculation: The formula for calculating gratuity is:
  • For employees covered under the Act: Gratuity = (Last drawn salary × 15/26) × Number of years of service.
  • Where, the last drawn salary includes Basic + Dearness Allowance.
  • 15 days of salary is considered for each completed year of service, and the division by 26 accounts for the number of working days in a month.
• Payment Timeline: Gratuity must be paid within 30 days from the date it becomes payable. If there is a dispute, the employer must inform the employee and the payment timeline may extend.
• Exemptions: Certain categories of employees (like those who are terminated due to misconduct) may not be eligible for gratuity.
• Application Process: Employees must submit a written application for gratuity to the employer after resignation.

If your employee has completed five years of service and has submitted the necessary application, they are likely entitled to gratuity as per the Act. If you dispute their eligibility, you may need to provide evidence supporting your claim, such as documentation regarding their length of service or reasons for termination.

In case of unresolved disputes regarding gratuity, the employee may approach the Controlling Authority under the Act, as specified in Section 7 of the Payment of Gratuity Act, 1972. Additionally, the employee may seek legal recourse under Section 9 of the same Act for the enforcement of their right to gratuity.