My employee in Rourkela 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 it is payable to an employee who has completed a minimum of five years of continuous service with an organization.

Here are the key points regarding gratuity calculation and eligibility:

• Eligibility for Gratuity:
  • According to Section 4 of the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have rendered continuous service for not less than five years.
  • The five-year requirement is waived in cases of death or disablement due to accident or disease.
  • Gratuity is payable to employees upon resignation, retirement, or termination, provided the eligibility criteria are met.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: (Last drawn salary × 15/26) × Number of years of service.
  • Here, the last drawn salary refers to the basic salary plus dearness allowance.
  • The factor "15/26" is used because gratuity is calculated based on 15 days' salary for every completed year of service, and a month is considered to have 26 working days.
  • For employees who have been in service for less than six months, gratuity is typically not payable unless specified otherwise by the company's policy.
• 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 the gratuity is not paid within this period, interest at the rate of 10% per annum may be levied from the due date until the payment is made.
• Disputes:
  • If there is a dispute regarding eligibility or calculation, the employee can file a claim before the Controlling Authority under the Act.
  • Section 8 of the Act empowers the authority to decide on the payment and can impose penalties for non-compliance.

It is advisable to maintain proper records of employee service and salary details to ensure compliance with the provisions of the Payment of Gratuity Act, 1972.