My employee in Srinagar 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 resignation if they have completed the minimum qualifying period of service, which is five years. In the case of a dispute regarding eligibility, it is essential to understand the calculation, conditions, and circumstances under which gratuity is payable.

The Payment of Gratuity Act, 1972 governs gratuity payments in India. Here are the key points regarding the eligibility and calculation of gratuity:

• Eligibility Criteria:
  • An employee must have rendered continuous service of not less than five years to be eligible for gratuity, as per Section 4 of the Payment of Gratuity Act, 1972.
  • However, if the employee's termination is due to death or disablement, the five-year condition does not apply.
  • Employees who resign after completing five years are entitled to gratuity irrespective of the nature of resignation (voluntary or otherwise).
• Calculation of Gratuity:
  • The formula for calculating gratuity is: (Last drawn salary) x (15/26) x (Number of years of service).
  • Here, the 'last drawn salary' includes basic salary and dearness allowance.
  • For instance, if an employee's last drawn salary is ₹30,000, and they have served for 6 years, the calculation would be:
    • Gratuity = ₹30,000 x (15/26) x 6 = ₹1,03,846 approximately.
• Payment of Gratuity:
  • Gratuity must be paid within 30 days from the date it becomes payable, as mandated by Section 7 of the Act.
  • If there is a delay, the employer is liable to pay interest as prescribed under the Act.
• Dispute Resolution:
  • If there is a dispute regarding gratuity, the employee can file an application with the controlling authority under the Act, as per Section 8.
  • The authority will adjudicate the matter and can direct the employer to pay the gratuity if found payable.

In conclusion, if the employee has completed five years of service and meets the other conditions set forth in the Payment of Gratuity Act, 1972, they are eligible for gratuity upon resignation. Any dispute should be resolved through the proper channels as outlined in the Act.