My employee in Saharanpur 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 under the Payment of Gratuity Act, 1972, upon their resignation if they have completed a minimum of five years of continuous service with the employer. However, there are specific conditions under which gratuity is calculated and paid, and understanding these is crucial for both the employer and employee.

Here are the key points related to the calculation and payment of gratuity:

• Eligibility:
  • Employees are eligible for gratuity after completing a minimum of five years of continuous service.
  • In cases of termination due to death or disablement, gratuity is payable regardless of the duration of service.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service.
  • Last drawn salary refers to the basic salary and dearness allowance (DA) of the employee.
  • The factor 15/26 is derived from the assumption that a month consists of 26 working days.
• Payment Timeline:
  • Gratuity must be paid within 30 days from the date of application by the employee.
  • If the employer disputes the gratuity, they are required to communicate the reasons in writing.
  • The employee can appeal to the controlling authority if the gratuity is denied or delayed.
• Relevant Provisions:
  • Payment of Gratuity Act, 1972, Sections 4, 7, and 8 govern the eligibility and calculation of gratuity.
  • Section 4 provides the formula for calculation, while Section 7 addresses the responsibility for payment.
  • Section 8 deals with the circumstances under which gratuity may be withheld or disputed.

In summary, if your employee has worked for at least five continuous years, they are entitled to gratuity upon resignation. Disputes should be handled in accordance with the Payment of Gratuity Act, ensuring compliance with the stipulated timelines and procedures for payment and appeal.