My employee in Varanasi 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 calculated based on the provisions of the Payment of Gratuity Act, 1972, and is payable to employees who have completed a minimum of five years of continuous service with an employer.

Here are the key points regarding gratuity calculation and payment:

• Eligibility: An employee is eligible for gratuity if they have completed at least five years of continuous service under the same employer, except in cases of death or disablement, where the requirement of five years does not apply (Section 4 of the Payment of Gratuity Act, 1972).
• Calculation Method: The gratuity amount is calculated using the formula:
  • For employees covered under the Act: Gratuity = Last drawn salary × 15/26 × Number of years of service
  • For employees not covered under the Act: Gratuity = Last drawn salary × 1/2 × Number of years of service (for every completed year).
• Salary Definition: For the purpose of gratuity calculation, the term "salary" includes basic pay and dearness allowance but excludes bonuses, overtime pay, and other allowances (Section 2(s) of the Act).
• Payment Timeline: Gratuity is required to be paid within 30 days from the date it becomes payable. If the gratuity is not paid within this period, the employer is liable to pay interest at the prescribed rate (Section 7 of the Payment of Gratuity Act, 1972).
• Disputes: If there is a dispute regarding the gratuity amount or eligibility, the employee can file a claim with the Controlling Authority under the Act within six months from the date of the gratuity becoming payable (Section 8 of the Act).
• Exemptions: Certain categories of employees are exempted from the provisions of the Payment of Gratuity Act, including those working in establishments with fewer than 10 employees.

In summary, if your employee in Varanasi has completed five years of continuous service, they are entitled to gratuity upon resignation. Ensure compliance with the Payment of Gratuity Act, 1972 to avoid legal complications.