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I think that the questioner requires answer only for the compensation in lieu of unavailed leave at the credit of the employees likely to be retrenched due to downsizing of the establishment. There are different kinds of leave such as casual leave, sick leave or medical leave, annual leave with wages or earned leave or privilege leave and the like depending upon the type of the establishment and nature of the work of the employees. Not all kinds of leave can be carried forward over a period of years and accumulated to a certain extent in the leave a/c of the employees.Some leaves like C.L, sick leave, if unavailed, get lapsed at the end of the calendar year. Therefore, only those leaves which can be accumulated over the years as per the employment law applicable to the establishment or as per the contract of employment need to be considered for encashment on the termination of employment like resignation, retirement, retrenchment etc. If the management has the magnanimity to permit encashment of all kinds of unavailed leave at the time of retrenchment, well, there is no legal bar other than from the income tax perspective!