Labour & Industrial Laws
Agm - Ir & Hr
Anilrsv Sharma
Statutory Compliances, Contract Labour, Pay

MADURAI: Provident fund need not be deducted from the payment made towards annual leave encashment, the Madurai Bench of the Madras High Court has ruled.

Allowing a batch of writ petitions filed by various factories, Justice K. Chandru said leave encashment cannot be considered part of the basic wage for deducting provident fund contributions. Employees usually did not exhaust their earned leave; they chose to encash them at the time of retirement, or the sum was paid to their heirs in case of contingency such as the death of an employee. Hence, they would not be benefited at all by provident fund deduction from the encashment of annual leave.

Though employers made provisions for annual leave encashment, it was seldom paid unless a contingency arose.

The payment need not be made at all if an employee availed himself of the entire earned leave. Therefore, contribution towards provident fund could not be based upon contingencies and uncertainties, the judge said.

Furthermore, the term ‘basic wage’ defined under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, included all emoluments earned by an employee while on duty or on leave or on holidays with wages.

The holidays mentioned in the definition could only mean weekly holidays, national and festival holidays and so on.

10th January 2008 From India, Pune
To all members
His Lordship Mr.Justice.K.Chandru had while sitting in Principal Bench of Madras High Court had delivered the judgment that NO PF DEDUCTION ON LEAVE ENCASHMENT in the THIRUAROORAM's case, as early as in 2008. Subsequently SC delivered the same judgment in IMPAL's case referring to Justice K.Chandru's judgment.
10th March 2010 From India, Tiruchchirappalli
Pl provide me soft copy of "Madurai Bench of the Madras High Court ruling on PF on Leave Encashment . Awaits ur response pl. Thanks & Regards, Anil Kumar Sharma
4th August 2010 From India, Mumbai
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