Labour Laws & Ir
Rajat Joshi
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Hi all,
Can you please help me out on labour matter.
A factory worker who has applied for encashment of Earned leave. He has a balance of 105 days and want to encash 60 days.
Is it allowed and what is the basis? Can you give me reference to this issue in Factory's Act 1948.
As per the agreement with Union - only casual leave is encashable.
Would appreciate your inputs.
Hi Folks,
Got the answer and here it is...
As per Section 79 of Factories Act 1948, it is enumerated that :-
Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child.
However there has been recent amendments in 2002 via The Small Enterprises( Employment Relations) Act 2002 which is applicable to whole of India.
Under chapter IV - conditions of work , clause no 11 point 4 mentions that
A worker shall be permitted to accumulate leave upto 45 days in addition to the leave entitlement of the current year earned on the basis of the work done by him in the previous year and he shall be entitled to encashment of entire accumulted earned leave including leave earned during the current year pro rata in case his services are terminated or he quits the service.
<link no longer exists - removed>
Hi all, Just to confirm whether we are liable to deduct PF on leave encashment of workers? If so please help me to provide the links to confirm the same. Regards, Rajat
Hi rajat,
Dont have a link, but the circular was issued by the Employees' Provident Fund Organisation dated 16 May, 2005 that wef 01/10/1994 Leave encashment paid/payable to the employees covered under the EPF Act shall attract PF and hence all employers must deduct @12% from such Leave encashment paid/payable to its coverable employees wef 01/10/1994 and must deposit the matching contribution @12%.
Anuradha Zingade
Hi Anuradha,
Many thanks for the help...just checked the website of PF but no avail..with the above reference shall approach the authorities to get the notified circular..
Hmm..why should pf deduction be made leave encashment as neither parties get the benefit? Does it get accumulated in the accounts of employees PF account?..
Hi All,
The law statements clearly states the leave encashment as per the prorata and also during the termination of his tenure/resignation. But i just need to know what should be conditions/procedures when an employee applies for the leave encashment during his period of employment. In our case we have just now announced that maximum number of contribution will be 90 days only. Those who have more than this will either have encash it or have to avail the leave. Now i want to clarify that the leave encashment has to be done on the basis of current Basic Salary or Last year Basic Salary.
please reply.
nand joshi
Hi All.. Plz explain Leave Ruls & Earned Leave Encashment Act under Shops & Commercial Estblishment Act. regards, Rashmi
Dear Rajat,
You cannot encash PL if you have an agreement with the union for encashment of Casual leaves only. It doesn't matter what the law states. Cause the agreement with the union is also an established and applied law for your concern.

Dear Rajat,
No, you are not entitled to deduct Pf on leave encashment, as leave encashment is not considered as wages. Please search the web for the judgement given by The Honourable Supreme Court on this.

Dear Mr.Rajat,
You are not liable to pay pf contribution on el encashment,please find attached a copy of supreme court order regarding pf contribution on leave encashment.

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Dear Rashmi
Shops & Commercial Establishment Act is not a central Act. This is a State Act & therefore you are advised to go through your State Shops Act for further clarification in the matter of leaves.

(Labour Law & Legal Consultants)

Dear Rajat,
PF is NOT deductible on Leave Encashment. There is a Supreme Court ruling in this regard about two years back.
I am afraid I do not have the case details with me just now. But I have seen it and we did implement this rule in our Co.
Vasant Nair
Can an earned leave be compensated in lieu of casual leave? I mean if an employee has consumed all his CL and ML but has EL and he wants few days of leaves then is it possible to consider his leaves?
Dear Friends,
Factories Act and the Shops Act provide guidelines with regard to grant of EL and encashment of the same.
However what matters most is how the Leave Policies have been framed in the Company. These rules may vary from Co. to Co.
I am aware of some organizations where all days of EL are encashed and a cheque for the same given to the employees in the first week of Jan.
In the Co. that I worked for last, rules with regard to EL encashment provided that all EL in excess of 30 days would be encashed and money paid to concerned employees in the first week of Jan. The rules also provided for EL of 30 days each year. Encashment was done on Gross salary.
Incidentally, PF is NOT applicable to amounts paid against encashment of EL.
There is a recent SC ruling on this.
Best Wishes,
Vasant Nair
I am not in agreement with this view. Its simple. You cannot ignore the provsions of law. Not withstanding anything contained in an Agrement with the Union, the provisions of law will always prevail.
Please apprecaite the fact that No Agreement can incorporate clauses which are violative of provisions of law. Sucg agreemenst will never be registered with the Labour Authorities.
There is always a difference between Law & Rules.
Vasant Nair

Hi All,
Please help me to get my leave encashment from the company I have resigned recently. I was working in a company from 18.04.2005 and resigned on 14.04.2010. As per the HR that I have 31 days available but we will pay only 50% of your current basic salary i.e. my basic is Rs 18000/- pm and I am eligible for Rs 9000/- only.
Please help me and suggest what reference should I give so that I can get my full leave encashment.
Thanks & regards
Dear Friends,

To understand the provisions for availing EL under the Factories Act, please read the contents of Chapter VIII of the Factories Act.

Care should be taken when addressing entitlement of EL in that an employee can carry forward any number of ELs if the accumulation of the same is a result of refusal of application for grant of EL.

Every organization has their own rules with regard to encashment of EL. The law provides for encashment at the time of exit.

In my last organization, the leave policy provided for encashment all EL in excess of 30 days at the end of the calenday year. How it worked was:

1. 30 days of EL was allowed to employees if they had worked continuously from jan 1 to 31st Dec of the year. On Jan 1st of the following year 30 days earned during the last year would be credited to the employee's account.

2. In the second year, if the employee again worked forthe whole year, he would again earn 30 dSays' EL. On Jan 1st of the follwoing year he would have 60 days to his credit.

3. Of these 60 days, 30 days would be encashed on Gross Salary and the balance 30 days would remain his his kitty.

Unavailed Casual Leave automatically lapsed at the end of the year.

The policy allowed for carrying forward SL upto 15 days.

Vasant Nair
hello every one go through the pf website and check the updataion where it has been clearly mentioned that pf amount will not be deducted from the leave encashment amount . Ratikanta Rath
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