Labour Law & Hr Consultant
Bhuvnesh Singh
Human Resource/ Industrial Relations

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79. Annual leave with wages
(1) Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of-
(i) if an adult, one day for every twenty days of work performed by him during the previous calendar year;
(ii) if a child, one day for every fifteen days of work performed by him during the previous calendar year.
Explanation 1 : For the purpose of this sub-section-
(a) any days of lay-off, by agreement or contract or as permissible under the standing orders;
(b) in the case of a female worker, maternity leave for any number of days not exceeding twelve weeks; and
(c) the leave earned in the year prior to that in which the leave is enjoyed;
shall be deemed to be days on which the worker has worked in a factory for the purpose of computation of the period of 240 days or more, but shall not earn leave for these days.
Explanation 2: The leave admissible under this sub-section shall be exclusive of all holidays whether occurring during or at either end of the period of leave.

Dear Bhuvanesh,
The "Explanation.2" to section 79(1) of the Factories Act,1948 relating to Annual Leave with Wages, if simply put, excludes the intervening holidays and holidays occurring either at the beginning or at the end of a spell of such leave applied for and sanctioned.
The normal practice being adopted particularly in Government Departments is that the holidays falling in between in a continuous spell of earned leave get included or merged with the earned leave availed while the holidays that fall either at the beginning or at the end of the single spell of leave are treated as prefix or suffix as the case be. But a slight departure is made in the case annual leave with wages under sec.79 of the Factories Act,1948 by virtue of the explanation 2 to subsection (1) of sec.79. That is the intervening holidays falling within the spell of leave applied for and sanctioned get excluded to the effect that the actual no of earned leave remains the same.

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