Hello Fellow HR(s), Is it Mandatory to carry forward or encash the Privilege Leave of an Employee. What are the legal implications if the same are not carried forward nor encashed.
From India, Ahmedabad
Labour Law & Hr Consultant
Pan Singh Dangwal
Joint Manager
Management Consultancy
Nagarkar Vinayak L
Hr And Employee Relations Consultant


Dear friend,

When there is provision for EL, its accmulation and encashment in the event of termination of employment in the establishment-specific labor law applicable, the employer has to mandatorily comply with all such provisions. Failure to do so would entail penal action by the enforcement authority and it can also lead to raising of industrial dispute by the workmen aggrieved.

From India, Salem
Pan Singh Dangwal

Dear Umakanthan sir,

I always learned a lot through your valued suggestions.

I have a query on the subject matter. If a organisation, through its leave policy, defines maximum limit of accumulated leaves. In such case if any employee already accumulated maximum leave then whether the company is legally liable to pay balance PL of current year or it can be lapsed.

For example maximum PL is 30 and as on 31.12.2020 Employee "A" already had 30 PL balance and for the current year as on 31.12.2021 the employee "A" earned 15 PL for the year. In such whether the company is bound to pay 15 PL or it can be lapsed (as per company leave policy).

Pls share your valued suggestion on the matter.

Thanks in advance.

From India, Delhi

There are two aspects to this problem, firstly the leave accumulation cannot exceed the maximum and the excess leave lapses, Secondly in the example cited, the leave being added on 1st January 2021 is 'Advance Credit', in many organisations advance credit of leave is not counted as accumulated leave. So the advance credit is allowed and kept separate and after the advance credit period is over, the excess leave over thirty days is lapsed. The approach is to be as much employee friendly as is possible.
From India, Mumbai

Dear Pan Singh,

I endorse the reply of Mr.KK!HR who is bestowed with rich experience in the practical side of HRM. In my experience just as an administrator of labor laws, what I can say is that the normal calculation of any leave of accumulative nature linked to the days worked by the employee in a year like that of EL would be taken up at the end of the year only. Therefore, the leave accrued during the year has to be added to the existing credit balance and only then the total leave at credit has to be rounded off to the ceiling. If my contention is correct and is in sync with the practice followed in the industry, the total leave balance of 45 days as on 31-12-2021 at the credit of employee 'A' by adding the 15 days earned during the entire year 2021 would be rounded off to 30. It is only for the employee to be conscious about his leave balance and avail it intelligently in a planned manner to avoid such lapse. Anticipating such a situation, no employer, I think, would come forward to ask the employee to go on leave.

A final note of caution:
The leave policy of an organisation can be more liberal so as to confer better leave benefits to its employees; but the policy cannot run counter to the beneficial provisions of law.

From India, Salem
Nagarkar Vinayak L

Dear colleagues,
This is in addition to what the learned colleagues, have stated on this subject.

The maximum limits of EL accumulation and carry forward must be in sync with provisions under Factories Act or State Shop Act as applicable.

Since law lays down minimum requirements, the employer can give better leave facilities in terms of leave quantum, accumulation and encashment etc. but not lower than law. Anything lower than law, entails penal action. But in case of better facilities, these aspects will be governed by the company policies in this matter.

As per law, reference date of leave earned and/or to to be carried forward up to laid down limits, is I st of January of the subsequent year. The EL is said to have earned if required number of days are worked in the previous calendar year and credited in the account on 1st of Jan which can be availed in entirity or in instalments permissible by the leave rules.

Encashment of balance EL is allowed under the law upon termination of services . Some organisations have better encashment rules while in service and same will apply for encashment of EL for situations - in service or termination.


Vinayak Nagarkar
HR and Employee Relations Consultant

From India, Mumbai

It is mandatory to carry forward or encash the Privilege Leave of an Employee. The employee can take the legal course against the employer if the same are not carried forward nor encashed.

In general Earned Leaves does not go lapse but carried forward up to accumulation limit beyond the limit get encashed in salary. The leave of other nature CL and SL goes lapse if not availed during the calendar year but not the EL.

The leave rule of each establishment is differ from one to other, where no leave rule is available, the rules under Factories Act/ S&E Act and Rules of Mines Act is applicable to determine the matter.

The shops and establishment Act provides that every employee shall be authorized to preserve his earned leave for 40 days and allowed to encash the unused earned leaves.

From India, Mumbai
To avoid any sort of such controversies in the organization, between the manager/management and the employees, the INDUSTRIAL EMPLOYMENT (STANDING ORDERS) 1946 ACT, is drafted perfectly by observing all the pros and cons and to get in touch with the LABOUR COMMISSIONERS OFFICE with frequent visits to the labor commissioner office, in getting the drafts vetted and then okayed in full with the signatures of the employees'/workmen's consent and the representative of the management either a PERSONNEL MANAGER/HR MANAGER, as per the prevailing designations, would avoid all mishaps in the place of work.

After all, the management must consider the work- forces as their family members, but in practical?????

From India, Hyderabad

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