Having leave encashment policy of Earned leaves is a statutory requirement for any company in India? - CiteHR
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Anand Anil
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I need to know if having leave encashment policy of Earned leaves is a statutory requirement for any company in India. if Yes, do we have some notification OR act stating so. Please help! Thanks!
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Earned leave is a leave earned by an employee while on duty. Rules vary under Factories Act and Shop and commercial establishment Act. Please confirm your current organisation. Regards
Law says every employee who has served the organisation for a specified period will be entitled to earned leave in the subsequent period.

Normally leave earned during the course of employment is to be availed by the employee for attending his / her social and personal duties. On encashment of earned leave during the employment , law is silent and employer can decide to allow leave with wages to employee or may encash the value of the leave.

However law is specific with respect to resignation / superannuation or termination. It says that balance of earned leave(s) are required to be paid by employer to respective employee while making full and final payment of dues due to him.

The above falls under the prerogative of employer for encashment of leave during employment but it is statutory to make payment of unavailed earned leave at the time of full and final settlement. I hope you can apply the above as per requirement of your company considering absenteeism and yearly financial burden.

Does an employer has right to withhold leave encashment dues due to non submission of no dues at the time of retirement.
I would like to know that earned leave encashment should be on Gross Salary or Basic + DA.
Also looking for supporting document or Name on law under which it comes and Section.
Nilesh Dhameliya
as you said that paying balance earned leaves at the time of full and final settlement is statutory requirement, can you please share the reference of same. it will be helpful. regards, Saunee
Dear Saunee, Thanks for your reply on this, Well, I am talking about Earned leave balance at the time of F and F. we must encash his Earned Leaves so it should be on Gross Salary or Basic + DA.
Dear Saunee
Please check the relevant section of leave under the shop and commercial establishment act of your state. Matter has clearly been defined under the same. Else let me know the state where your organisation is located , i will send you the same.
Dear Gautam
No employer can withhold the full and final payment including payment due against leave encashment with a valid reason duly communicated to employee.
At the time of retirement / resignation of an employee charge given to him during the course of employment is required to be taken over. Handing over the charge pertaining to various departments / sections is termed as No Dues. Please check any other specific reason for holding back leave encashment by an employer.
Earned leaves are encashed on basic salary not the gross salary.
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