Understanding Leave Encashment: How Does It Work When Leaving a Job?

Hi,

Kindly advise on the following:

1) What are the various leaves that can be encashed during separation of an employee from the organization or the next calendar year?

2) Can privilege leaves be encashed during separation from the company even without an employee completing one year of service in the organization?

3) What is the minimum number of privilege leaves that can be encashed if an employee has a good number of privilege leave balances?

Regards,
Veena

Leave encashment is purely an internal matter of the company. Normally, all unavailed leave except Casual Leave and Sick leave shall be encashed at the time of leaving service. Encashment is to be made unconditionally without reference to service and adequacy of leave after encashment. However, if an employee is continuing his service, a restriction as to the minimum number of leave which should be carried forward for availing in the succeeding year shall be imposed with a view to avoiding leave without pay.

Regards, Madhu.T.K

Ms. Veena:

The leave rules of the organization will spell out clearly the types of leave that can be encashed.

In my experience, I have worked in an organization which encashes annual/privilege leave to the extent of 50% maximum to the number of days leave approved. To illustrate - an employee has 20 days of leave and applies for 6 days of AL/PL. He has the option to encash a maximum of 6 days or fewer number of leaves, and his leave balance will be reduced by 6 days of AL/PL and the number of days of encashment he requests.

Some organizations encash all the Casual leave in balance as of 31st December.

Some organizations have encashment of AL/PL annually, while some others carry forward and allow encashment upon severance of services from the same.

2) When an employee severs from the organization, even if not completing one year of service, they shall be eligible for annual leave on a pro-rata basis from the date of joining till the date of leaving.

3) As per the company's norms/rules and regulations, the minimum number of PL can be encashed.

Hope the above meets your requirements.

Good Luck.

:::Dhinakaran

Veena,

1) What are the various leaves that can be encashed during separation of an employee from the organization or the next calendar year?

2) Can privilege leaves be encashed during separation from the company even without an employee completing one year of service in the organization?

3) What is the minimum number of privilege leaves that can be encashed if an employee has a good number of privilege leaves balance?

Regards,
Veena

Dear Sir, I have resigned from the organization in the 11th month of my joining date. I am currently serving a notice period of 2 months. I was informed by HR that Paid Leave (PL) can only be applied for after 12 months of service. However, since I have submitted my resignation before completing 12 months, I am being told that I am not entitled to the encashment of PL. I have reviewed the company employee handbook for any such clause but couldn't find one. Could you please advise me on what is correct in this situation and provide any references to the applicable law? I am employed in an engineering firm in Gurgaon.

Thank you and Regards,
Namit

Being an engineering firm, I presume your company is covered by the Factories Act. If so, you will be entitled to earn leave at the rate of one leave for every twenty days worked during the 12 months immediately preceding the day of your leaving. Since you are in the notice period and there are two more months to go before your effective date of relieving, you can claim encashment provided you have worked for at least 240 days during this period.

If you are working as a manager and do not fall under the definition of "employee" or "workman," please follow whatever is mentioned in the handbook or appointment letter.

Regards,
Madhu.T.K