My employee in Tirunelveli 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 employees under specific conditions as outlined in the Payment of Gratuity Act, 1972, and is calculated based on the employee’s tenure and last drawn salary.

According to the Payment of Gratuity Act, 1972, gratuity is a statutory benefit paid to employees as a reward for their long service. Here are the key points regarding gratuity calculation and its eligibility:

• Eligibility Criteria:
  • An employee must have completed at least 5 years of continuous service with the same employer to be eligible for gratuity, except in case of death or disability.
  • Resignation or termination must be due to reasons other than misconduct for the employee to claim gratuity.
• Calculation of Gratuity:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Here, "Last drawn salary" refers to the employee's basic salary plus dearness allowance.
  • The factor 15/26 is used since gratuity is calculated based on 15 days' wages for every completed year of service, assuming a 26-day work month.
• When Gratuity is Payable:
  • Gratuity is payable within 30 days from the date it becomes payable, as per Section 7 of the Payment of Gratuity Act, 1972.
  • If the employer fails to make the payment within this period, he may be liable to pay interest at the rate specified by the government.
• Dispute Resolution:
  • If there is a dispute regarding gratuity eligibility or calculation, an application can be made to the Controlling Authority under the Payment of Gratuity Act, as per Section 8.
  • The authority will conduct an inquiry and issue a decision, which can be appealed to the appropriate appellate authority.

It is important for employers to maintain proper records of employee service and salary details to avoid disputes regarding gratuity claims. If your employee in Tirunelveli meets the eligibility criteria, they should be entitled to gratuity as per the provisions of the Act.