My employee in Tirupati 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 a statutory benefit provided to employees in India under the Payment of Gratuity Act, 1972, and is payable when an employee completes a minimum of five years of continuous service. In the case of resignation, gratuity is calculated based on the last drawn salary and the number of years of service rendered.

Here are the key points regarding gratuity calculation and its payment:

• Eligibility: An employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the same employer, as per Section 4 of the Payment of Gratuity Act, 1972.
• Calculation of Gratuity: Gratuity is calculated using the formula:
  • Gratuity = (Last drawn salary × 15/26) × Number of years of service
  • Where the last drawn salary includes basic pay and dearness allowance.
  • The factor 15/26 is used as it assumes a 26 working days month, thus calculating gratuity based on 15 days of salary for each completed year of service.
• Payment Timeline: Gratuity must be paid within 30 days from the date it becomes payable. If not paid, the employer can be penalized under Section 9 of the Payment of Gratuity Act, 1972.
• Disputes and Claims: In case of disputes regarding eligibility or amount, the employee can file an application with the controlling authority under the Payment of Gratuity Act, as stipulated in Section 7.
• Exemptions: Certain categories of employees, such as those working in a seasonal establishment or those who have been terminated due to misconduct, may not be eligible for gratuity, as per Section 4(6) of the Act.

In conclusion, if your employee has completed the requisite five years of service and is claiming gratuity, you are obligated to comply with the provisions of the Payment of Gratuity Act, 1972. Ensure that you review the tenure and terms of employment before disputing the claim.