My employee in Secunderabad 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, if they have completed a minimum of five years of continuous service, and the calculation of gratuity is based on the last drawn salary of the employee.

Here are the key points regarding gratuity calculation and eligibility:

• Eligibility for Gratuity:
  • Employees must have completed a minimum of five years of continuous service with the company.
  • Gratuity is payable upon resignation, termination, or retirement of an employee.
  • In the case of death or disablement, gratuity is payable irrespective 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

    Where:

    • Last drawn salary includes basic pay and dearness allowance.
    • 15 is the number of days for which gratuity is calculated per year of service.
    • 26 is the number of working days in a month.
  • For example, if the last drawn salary is ₹30,000 and the employee has worked for 6 years, the gratuity would be:

    Gratuity = (30,000 × 15/26) × 6 = ₹1,03,846.15

• Payment Timeline:
  • Gratuity must be paid within 30 days from the date it becomes payable.
  • If there is a delay, the employer is liable to pay interest as per the provisions of the Act.
• Dispute Resolution:
  • If there is a dispute regarding gratuity eligibility or amount, the aggrieved employee may file an application with the controlling authority under the Payment of Gratuity Act.
  • The controlling authority will assess the claim and pass an order, which can be appealed in the appropriate forum if needed.

It is important to maintain proper documentation regarding the employee's service tenure and salary to accurately assess gratuity claims and prevent disputes.