Cost Reduction On Leave Encashments - CiteHR
Executive Human Resource At Emcure Pharmaceuticals
Hr , Personnel & Admin
Premkumar Nair
Manager (hr)-retired
Engineering Services - Qa&i
+2 Others

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Dear Seniors ,
We are an IT company following a leave policy where there are 12 CL / 2 OL and 15 PL ( after completion of 1 year)
The Management has identified that we are spending a lotof amount on leave encashments when a person resigns and asked me for ways out so that we can save the cost of leave encashment without any injustice to the employee segment
Need your help/suggestions on the same
Ruchi Shah
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Hi ,
CL is Not encashed .
Only PL (Earned leaves) are encashed . It is encashed on Basic + DA only .
So the best way to reduce the load of encashment amount is in the next
increment dont increase much amount in basic instead increase more
in allowances like special allowances etc .By this if the basic is kept less
the burden will be less to the company...
This is the idea but offcourse again it depends on your company policy....
Rajeev Dixit
Is that correct if we increase number CL and reduce PL or Earned leave to avoid load of encashment.
Hi , If i am Not wrong you can Not simply increase CL and reduce PL to reduce the burden ....... For every 20 days one PL is applicable . Regards Rajeev Dixit
Casual or Sick Leaves are not encashable.
You can restrict encashment of Paid Leaves by restricting the number of leaves transfered to next year to a certain limit suitable to your company for encashment.
Rest of the leaves shall be availed by the employee in that particular year or otherwise considered as lapsed.
AK Mathur
The labour welfare legislations such as Shops& Estt Act, Factories Act, etc prescribe certain leave for every minimum days of working apart from weekly off. Thus every employer has to grant min. Leave as PL or annual leave and encashment thereof. Of course, the company can decide further liberalisation thru some agreement with the employees or their unions. Thus you may do any cost cutting jugglery within the provisions of law.

There is limitation on minimum number of leaves CL/ SL/EL/ Public Holidays/ RH etc. according to their state rules under the relevant act, but there is no limitation on providing more than minimum.

Regarding encashment of leaves Earned/ Paid leaves are generally considered. Different combinations are considered as under:

a) Put Earned leaves under two heads as Encashable and Non-encashable heads,

b) Encashment can be considered during service period or only on leaving the company,

c) Putting a limit for encashment of minimum or maximum leaves,

and as company desired.

Few companies also consider 120 days of sick leave as encashable at the time of only superannuation.

The idea of encashment is to retain the employee with the organization for a longer duration or till superannuation.Encashment of leaves is a minor benefit, considering employee and talent retention.

Only few companies know the importance of this if their employees feel responsible towards company and not taking leave unnecessarily.


AK Mathur
Hi, IT companies are under shop and establishment act so please study the act before deciding the leave policy.
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