My employee in Sagar 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 payable to an employee upon resignation if they have completed a minimum of five years of continuous service, as per the Payment of Gratuity Act, 1972.

Gratuity calculation is based on the last drawn salary and the duration of service. Here’s how it is calculated and the conditions under which it is payable:

• Eligibility: An employee is eligible for gratuity if they have completed at least five years of continuous service with the same employer, as stated in Section 4 of the Payment of Gratuity Act, 1972.
• Continuous Service: Sections 2(1)(c) and 2(1)(e) define continuous service, which includes service under the same employer without interruption, except for certain specified reasons such as maternity leave or layoff.
• Gratuity Calculation: The formula for calculating gratuity is:
  • Gratuity = (Last Drawn Salary × 15/26) × Number of Years of Service
  • Where "Last Drawn Salary" includes basic salary and dearness allowance.
  • 15 days’ wages for each completed year of service is used for calculation, based on a 26 working days month.
• Payment Timeline: Gratuity must be paid within 30 days from the date it becomes payable, as per Section 7 of the Payment of Gratuity Act, 1972.
• Dispute Resolution: If there is a dispute regarding eligibility or amount, the employee can file a claim with the Controlling Authority under the Act, as per Section 8.

It is essential for employers to maintain accurate records of service duration and salary to ensure compliance with the Payment of Gratuity Act. Failure to pay gratuity can result in penalties and interest on delayed payments.

In conclusion, ensure that your company follows the legal framework provided under the Payment of Gratuity Act, 1972, to resolve the dispute regarding the employee’s gratuity claim effectively.