Gratuity is a statutory retirement benefit paid to employees in recognition of their long and continuous service to an establishment. Governed by the Payment of Gratuity Act, 1972, employers are legally obligated to pay this amount within 30 days of an employee's exit. If your employer is withholding your dues, you have strong legal remedies.
1. Are You Eligible for Gratuity?
Under Section 4 of the Act, you are entitled to gratuity if:
- You have completed 5 years of continuous service with the same employer.
- The establishment employs 10 or more employees on any day of the preceding 12 months.
- Exception: The 5-year requirement is waived in the event of an employee's death or disablement due to an accident or disease.
2. How Gratuity is Calculated
The statutory formula for calculating gratuity is:
Gratuity = (Last Drawn Basic Salary + Dearness Allowance) x (15/26) x Number of Years of Service.
For example, if your basic salary was Rs. 50,000 and you worked for 6 years, your gratuity would be Rs. 50,000 x (15/26) x 6 = Rs. 1,73,076.
3. Legal Action Against Non-Payment (Form I)
If your employer fails to pay your gratuity, you should submit a formal application under Form I to the employer within 30 days of resignation. If the employer refuses or fails to respond, you can file a formal complaint under Form N before the Controlling Authority (Labour Commissioner) within your jurisdiction. The authority has the power to direct the employer to pay the gratuity along with compounding interest (usually 10% per annum) for the period of delay.