Is Our Company's Leave Policy Legally Sound? Seeking Advice on Accumulation and Encashment Rules

Hi, I am Archana, working as an HR with an IT company. I would like to know a few details on the legally accepted leave policy. Currently, we have provided 12 days of PL and 15 days of CL/FL/SL bifurcated as CL - 5, SL - 6, and FL (family leave) - 4. Is this legally correct? Next, what is the maximum number of PLs that an employee can accumulate in a year? Can we put a clause stating that beyond 60 days of privileged leaves, all leaves will be lapsed and cannot be carried forward? Do we have to provide encashment to the employees in case they cannot avail leaves due to heavy workloads? Please revert immediately. Thanks, Archana

Dear Archana,

CL will be 07, SL will be 14, and PL/EL will be calculated based on working day 01 for every 20 days with an accumulation limit of 45 (which can be more if management refuses to grant). The laws are silent on encashment; it should be as per employment/service rule or standing order. PL/EL will not lapse.

If you want more details, please feel free to ask.

Dear All,

I think you all are confused about the various policies of the company. As all the IT companies come under the Shop & Establishment Act, the leave policy should be framed keeping this law in mind. According to this law, the Shop & Establishment Act (leave rules derived from the Factory Act provision), an employee is entitled to:

- CL = SL = 12
- CL cannot be taken more than 3 at a time, while in the case of sickness, he can avail of his 12 leaves at a time.
- For example, if an employee applies for 2 CL, if approved, then the balance is CL = SL = 10 (both are directly proportional to each other).
- PL = 15, 1 for every 20 working days. There is no specific guideline in the law for accumulation.
- In some companies, people are accumulating leaves up to 90 days, while in Tatas, they are accumulating up to 210 days. It depends on the type of management, but we have to adhere to all the norms.

I hope this will help you. Please feel free for further clarification.

Regards,
Ranjeet

Dear Archana,

For legally accepted leave policy, you have to refer to the Shops & Establishment Act of the concerned state. Please note that it is a state labor law.

Regards,
Dilip.

Hi,

Just wanted to ask if, in case, the particular company A has offices in various states and its corporate office is in Bombay, then for that company, would the leave rules be as per the Maharashtra Shops and Establishment Act? If not, can the leave policy be as per the standing orders? If so, what would be the basis of the decision?

Swati

Dear Archana,

You have to follow the particular State Shops and Establishments Act because you are not a factory, and every State Shops and Establishments Act has different provisions for leave.

Thanks,
J. S. Malik

Dear Swati,

Please make a note that wherever we have a branch office in another state, we need to obtain a separate Shop & Establishment Registration Certificate for that branch office in that state. Once we acquire this certificate, the provisions of the shop and establishment act of that particular state will apply. Therefore, each state will have a separate leave policy, and leave records must also be maintained in accordance with the respective shop and establishment act.

To streamline this process, you can opt for an exemption and establish a provision for leave with a minimum uniform average after considering all shop & establishment acts in states where you have branches. This information can be included in the standing order for Technical/Bargainable/Worker categories staff or the HR Manual for Managerial Staff.

Additionally, please note that the standing order is a central act with state rules and is generally applicable to factories.

Regards,
Dilip