Is It Fair or Legal to Lapse Accumulated Leaves Over 48 Days in Our New Policy?

Hi,

Our industry comes under the Bombay Shops & Establishments Act. I have drafted a leave policy where PL- 21 days, CL- 3 days, and SL- 3 days. Up to 48 leaves can be carried forward, and a maximum of 10 leaves can be encashed in a year. This leave policy is effective from the calendar year 1st April 2009 to 31st March 2010.

This is the first time we have drafted a leave policy for our company. Previously, we used to provide 27 days of leave in a year without merging CL, SL, and PL. Currently, we have employees who have been with our organization for many years and have accumulated more than 50 to 60 days of leave.

If we implement the new leave policy, can we lapse the accumulated leaves exceeding 48 days, or do we have to compensate them through leave encashment? Can we suddenly inform the employees that their excess leaves over 48 have lapsed? Is it legal to lapse accumulated leaves?

Awaiting your earliest reply.

With Warm Regards,

My question is:

Hi Parab,

EL has to be encashed. Earned leave can be accumulated up to a maximum of 60 days. Beyond 60 days, the leave will be forfeited; however, the member can encash it by maintaining a minimum balance of 30 days to their credit. Encashment will only be permissible for a minimum of 5 days or more. The latest basic salary will be considered during encashment.

[bhardwaj_ch1@rediffmail.com](mailto:bhardwaj_ch1@rediffmail.com)

To Bhardwaj,

Thanks for your valuable reply. Kindly correct me whether PL can be accumulated up to 42 days as per the Bombay Shops & Establishment Act, beyond which the leaves will be lapsed.

With Warm Regards

I agree with Bharadwaj. Only 60 PL/EL can be accumulated; other than that, all extra EL will lapse. CL always lapses at the end of every year. SL can be carried forward but cannot be encashed at all. The leave year always starts with the calendar year and not with the financial year. Kindly check these points and give me the feedback if I am wrong.

I agree with Bharadwaj. EL/PL can be accumulated up to 60; all extra will get lapsed. CL cannot be carried forward to the next year nor encashed. SL can be carried forward but cannot be encashed. Leaves always start with the calendar year, i.e., from 1st January and not from the financial year, i.e., 1st April. Finally, if you announce to the employees now that their leaves are going to be lapsed, then there will be chaos. You have to intimate prior at least 6 months that if the leaves are more than the said leaves, then the extra leaves will be lapsed.