Understanding Earned Leave Accumulation: Do Companies Need to Encash Excess Leaves?

Dear All,

As per Section 79(5) of the Factories Act as applicable to AP, earned leaves can be accumulated up to 30 days for adults. Does this mean that the Company has to encash the balance leaves? For example, if the company has 15 days of EL:

- In FY 06, EL balance is 10 days.
- In FY 07, EL balance is accumulated to 20 days.
- In FY 08, the employee has not taken any leaves, and the balance in EL would be 35 days (10+10+15).

Pursuant to Section 79(5) of the Factories Act, does this mean that the company has to encash 5 leaves in FY 08 as accumulation is limited to only 30 as per the said section? Also, please clarify, can management make it a policy to ask employees to take compulsorily some portion of EL every year. Please quote the relevant legal position.

Regards

Any unavailed earned leave over and above 30 shall be encashed. The company cannot compel employees to take leave to avoid encashment. However, during a recession, if the management finds that a lesser number of workers need to be deputed for work, the management can request the employees to avail leave according to a schedule made in this respect. This can be practiced as a measure to avoid layoffs or even a sudden stoppage of production. But this requires the support of the employees.

Regards, Madhu.T.K

We are enlightened by your answers backed by solid legal grounds. In one of the organizations, they are giving 30 days of earned leave to supervisors who worked for one year in the previous year. However, for workers, they follow the rule in the Factory law.

Would you please shed some light and provide your considered advice on how they are granting 30 days of earned leave to supervisors with a legal background?

Thanks and regards,
B. Dakshina Murty

There is nothing wrong with making two rules for factory staff and office staff. Office staff, not being given overtime wages, can enjoy flexible timing and more leaves. As long as the number of leaves given is not less than what is mandatory under the Act, it will have legal sanctity. In some cases, where the office is situated outside the factory premises, the office will be under the Shops and Commercial Establishments Act, under which the number of leaves is more than what is to be given under the Factories Act.

Regards,
Madhu.T.K