Is It Legal for Companies to Withhold Paid Leave Cash-Outs After Resignation?

Hi,

I have been working with a large organization. A few months back, the company revised their leave policy. According to the new policy, no further PLs will be given to employees, and the total PLs accumulated till date have been locked. Now, the employee can neither take these leaves nor can he encash them. These accumulated leaves will be encashed in four installments, i.e., 25% of leaves will be encashed at the end of the current financial year, and the other three installments in the coming three years, 25% in each year. If an employee resigns from his job, his accumulated PLs will not be encashed and stand lapsed.

Please let me know what the law says. If someone resigns, is he entitled to get cash for the PLs he has earned in his total past work with the organization? Can any organization do such a thing, like not giving the benefit of past work to the employee? What is the remedy for this?

Regards,
Ravi Bharati

As per Section 79 of the Factories Act, 1948, it is stated that:

"Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child. However, you can get your PL adjusted against notice period if you do not want to raise a dispute. Whatever policy a company makes, it cannot deny the dues of an employee.

Cheers,
Sudhir"

As per any law, PL can never be lapsed as it is earned leave. It has to be encashed at the time of leaving the service, irrespective of any internal company policy.

Regards, Harshad

Dear,

As per the policy of encashment decided by your company, they will encash 25% this year and the rest in three instalments. It is alright as per the law. However, the leave is locked, and nobody will get leave hereafter, which is illegal. In the same movement, you have to encash all leave at the time of leaving the organization. It is clearly mentioned in the Factories Act.

Thank you.

J. S. Malik

Thank you for the quick response.

Actually, after working for around 5 years, I am going for PGPEx at one of the premier institutes in the country. I have a total of around 200 PLs which I had accumulated for the purpose of obtaining some cash to relieve the financial burden during my study.

I talked to my HR executive, and he says that I can only get 25% of leave encashment, and that too if I continue with the organization until the salary of April '09 is processed. If I leave early, I will get nothing.

The classes for the PGP course will start in the first week of April, and to join that, I will have to submit my job relieving letter to the institute. So, I want encashment of all 200 PLs.

What should be the approach now? Please advise.

Regards,
Ravi

I have newly joined a small software company in Mumbai which is registered under the Shops and Establishment Act. Here, only 1.5 leaves are accumulated per month per employee, i.e., 18 leaves per year. Leaves are accumulated up to no limit and encashable only after resignation. For resigned employees, 15 days' notice is a mandate, and no leaves are granted in the notice period even if the employee has accumulated leaves. If the employee is absent during the notice period, double days are deducted from his encashable leave balance for each day of absence. In the case of absconding employees, only 15 days' salary is deducted. As a result, employees are preferring to leave without notice. Management is not ready to change the policy as most absconding cases happen after taking the salary. Is this system a logical one? Is this as per the law?

Dear All,

This is to inform you that every company would formulate their company policy as per the Act. There can be minor differences in Act & Company policy but nothing major.

Here we are talking about Leave...

So, as per law, every employee is entitled to SL/CL/PL (subject to the appointment terms & conditions). SL/CL will lapse every year but PL cannot lapse, and no company can make any such type of policy. After resignation, an employee can claim his/her PL encashment. The company has to pay the balance PL encashment with full and final settlement.

Regards,
Jitender

Hi Jitender,

I work in an IT company. Here, we have 9 CL/SL (SL and CL are clubbed) and 15 PLs. Unused PLs get transferred to the next year up to a maximum of 25. However, there is no encashment at the time the employee leaves the organization. The remaining PLs lapse.

As far as I know, many companies practice this kind of leave policy. Is it up to the company to decide about the encashment of leaves, or is there a law that states PLs have to be encashable?

Regards,
Peonka

Dear,

It has been mentioned in the forum several times that IT companies do not follow the law of the land. If you are doing something that is illegal, it does not mean it is legal. We in the forum can only suggest legal actions; whatever your company is doing is separate. It is not the company's decision to make rules about leave and leave policies; it is the act that dictates it. However, we can make it more liberal as per our policy, but we cannot make it rigid.

Thanks,
J S Malik

There is no sick leave (SL) or casual leave (CL) in our company. We only offer 18 days of annual paid leave (PL). The management doesn't feel it is necessary to provide SL and CL, and employees are accustomed to the current system. Is this practice supported by law?

Assert your rights; do not be slaves to the rules imposed by companies. Indicate the statutory provisions to internal/external auditors visiting your company. Bring this to the company's attention through various employee representation forums, highlighting that this policy violates certain rules/laws. Responsible managements will consider your request.

The Shops and Establishment Act is not being enforced, unlike the Factories Act in our country. Consequently, knowledge workers are educated but treated as slaves. Our education sometimes makes us cowardly and cunning, leading us to always seek selfish motives.

Come forward, speak up, and represent your concerns in the forums.

Regards,
Sekar

I am working in the Engineering Industry - it is a small scale in Karnataka. I want to know what types of leave should be given. What is the minimum work that an employee has to do? If he joins in Nov-08, is he eligible for leave? And if he joins in Jan-09, what leave should be given - for both workers and staff. Please clarify. Thank you.