Confused About Leave Balances During Notice Periods for Resignation and Termination? Let's Discuss!

Dear All,

I have some confusions related to resignation and termination. Please guide me in the below-mentioned situations in terms of legislation:

1. An employee has resigned from service with one month's notice. He has leave balance, but there is no policy for encashment. Can he avail his balance during the notice period or can it be adjusted in his notice period?

2. An employee has been terminated from service with one month's notice. He has leave balance, but there is no policy for encashment. Can he avail his balance during the notice period or can it be adjusted in his notice period, or will it be encashed in case of termination?

Kind Regards,
Muqarrab Iqbal
Assistant Manager HR

In either case, if an employee has to avail his unavailed leave during the notice period, approval of the management is required. If the standing order is silent on this matter, the management has the right to refuse leave during the notice period, especially when the employee has served notice. This is because the very purpose of notice is that an employee should give sufficient time to the employer to find a suitable replacement. Therefore, until a suitable candidate is placed and responsibilities are handed over, the employee is expected to work.

If the leave is not encashable, typically, the employee will be permitted to take leave during the notice period. However, it is an internal matter only, and there is no specific rule to this effect.

Regards, Madhu.T.K

I agree with Mr. Madhu. In some companies, the leave is not encashable during the notice period. Regarding availing the leave during the notice period, the approval of the leave sanctioning authority is required, which may vary based on the duration of the leave for which the separating employee is applying. In addition, if there is a separate provision regarding the same in the Standing Orders/Service Rules, the same will come into play.

Regards,
Premson

I agree with the answers. If an employee has to avail his unavailed leave during the notice period, it is at the management's discretion to allow leave or not. There should be a clause in the standing order regarding this; otherwise, the management has the right to refuse leave during the notice period. You also need to check with the labor laws.

The above is not applicable for all categories of leaves. At the time of full and final settlement, as per the Factory Act, encashment of the balance of earned leave/paid leave will be given to the employee. This is applicable in cases of resignation as well as termination.

S. Parashar

Hi Iqbal,

Let's first understand the basic difference between Resignation and Termination. Resignation is leaving the services by one's own will, while termination is doing away with someone's services for misconduct, etc., or as per terms of appointment. Terminations are generally preceded with the issue of a formal charge sheet and an inquiry/advance notice. It is a management action.

Now coming to the second point: Encashment of due leaves? As you know, the main purpose of keeping the provision of a notice period is to arrange for the replacement once an employee resigns. The resigning employee is supposed to work during the notice period.

Now there could be many scenarios here. For example, an employee resigns but as a good riddance, management relieves him forthwith. In such cases, generally, leaves to one's credit are encashed. Terminations are with immediate effect, and in such cases, also balance leaves are encashed. After all, an employee earns them, and therefore, as a matter of fair practice, either they should be encashed, or if a resigning employee wants, they should be adjusted against his notice period if the management is in a position to relieve the employee forthwith. Where an employee works during his notice period, leaves to his balance are encashed.

Best, Jai