Confused About Leave Calculation During Probation? Need Urgent Help!

Hello,

I want to clarify a few confusions; please help me out with this. In our organization, we have a leave structure as follows:
- 0-6 months Probationary Period Leave Allotted: 3 Sick leaves
- 6 months-1 year: 12 leaves (CL+SL)
- 1-2 years: 12 (CL+SL) + 12 Earned Leaves

Now, my query is whether the 1-2 year span is calculated including the probationary period, or does the tenure start after the completion of the probationary period for 1-2 years? If so, how can I calculate the allocation of leave for employees joining in the middle of the month? (Our leave year is from April to March).

I need this to be solved ASAP. Can anyone help me on an urgent basis?

Thank you,
P. Chatterjee

The policy itself is wrong. You should have a policy that after completion of every month how many CL, SL (if he is not covered under ESI) need to be allocated. However, for every completed 20 actual working days, there should be one EL credited to the employee's account on the 1st of January every year. You cannot have the system without EL for 2 years; this is against the law (either Factories Act/ Shops and Establishments Act). In all organizations, the year for the leave period will be from 1st Jan to 31st Dec. If people join in between, the leave eligibility will be proportionate. For all practical purposes, the probationary period also includes for service. In some organizations, Trainees are eligible for special leave. Please discuss with the management and change accordingly.

Thanks and regards - Kameswarao

First of all, as mentioned above, you need to let us know whether you come under the Factories Act or Shop Act and whether these are workmen covered under ESI or not. The laws are different for both.

I am assuming they are executive or staff-level employees, in which case you can state that the leave for the previous year, or year 1 - 12 months, has lapsed. However, document this in a policy and keep it for reference. Twenty-four days a year is fine. A leave cycle from April to March is also suitable if they are non-workers.

I'm an MBA graduate and I'm willing to work as an HR Generalist. Can you advise me on where I can approach?

I am also an MBA HR and looking for a good start in corporate for a generalist profile. Please help.

Dear Chatterjee,

If your organization comes under the Shops & Establishments Act, then you are required to follow your state leave rules. Leave is calculated on a pro-rata basis; if you have 12 SL for a year and somebody joins in June, they shall be eligible for only 10 SL for that year. The same principle will apply to other types of leaves as well.

Regards,

Amit Seth.

Dear Mr. Chatterjee,

From the date of joining to the completion of probation - no leaves. After probation, the employee will be entitled to leaves after completing one year of service. For every 10 days worked, he will be allocated one leave, meaning 2.5 leaves per month. For the past completed year, he will be entitled to take 30 leaves (22 EL + 8 CL). All the leaves that the organization gives to employees are based on the present days of that employee in the last calendar year. This way, you can manage your schedule.

Regards,
Kedar

Dear Kameswar Rao,

As per your reply, I understood that one can encash their ELs after the completion of the year (if the company is following Jan to Dec Yr., then it is the 1st of January every year) or else one can accumulate up to the maximum number of ELs as per their state leave act. My query is, 'is there any rule of minimum ELs in hand before encashing the previous year total ELs as per the Factories/Shops & Establishment Act? If yes, how many?

Thanks in advance.

Regards,
Sujatha

Every organization has a leave policy. According to the leave rules, employees become eligible for leave from the date of joining (Trainee / Probation / Confirmed). The leave entitlement is as follows: CL-12, SL-12, and EL's-15. CL and SL are applicable to all employees. If a person joins during the calendar year, the leave will be calculated on a pro-rata basis. EL's are applicable to probationary staff after completing one year of service with 240 days working. Trainees become eligible after completing their training period.

Dear,

I can provide an example of our company's leave policy. In our company, we offer the following types of leaves:

1) 6 Casual Leaves: Available to all employees, whether they are on probation or permanent. An employee can avail 0.5 leave per month on full pay.

2) 6 Sick Leaves: Provided on full pay to all permanent and probationary employees, credited on a pro-rata basis.

3) 15 Earned Leaves: Exclusive to permanent employees. An employee can avail 1 earned leave per month, credited on a pro-rata basis.

In addition to these leaves, there are 8 holidays for everyone including New Year, January 26, Holi, Diwali, August 15, October 2, Dussehra, and Christmas.

Dear Sujatha,

First of all, you have to change your policy. The leave period always starts with the calendar year. One earned leave (EL) will be credited to your account after working for 20 days, which means 15 days of EL per year. According to the Factory Act, you cannot accumulate more than 30 days of EL. If the EL exceeds 30 days, you either have to disburse it or let it lapse, but the maximum you can retain is 30 days, subject to company policy (Standing Orders).

Regarding casual leave (CL), sick leave (SL), and general holiday (GH), you need to determine the minimum number applicable. Here, 7 CL, 7 SL, and 7 GH are mandatory.

Regards,
Mukesh

Hello, sir.

I want to know what is the amount of the minimum basic salary that we can include in the PF member. Please send your advice as soon as possible.

Dear Mr. Anand,

Up to ₹6500 of basic salary needs to be enrolled with PF. Exceeding ₹6500 can also be a member if they need it.

Dear Mukesh Ji,

Thank you so much for your reply. One of our employees has requested to encash his 15 ELs from the previous year (2008 - Jan to Dec) due to his personal requirements, and the same has been approved by the HR Department. However, the management has denied the payment citing the following statement from the company HR policy, "Employees can accumulate Earned Leave up to 45 days. Encashment of Earned Leave will be allowed in case of separation of employees."

Please advise if the management is correct in this situation.

Thanks & Regards,
Sujatha

Dear Sujatha,

The same is true. If the company has described in their HR policy that the accumulated leave will be encashed only at the time of separation from the company or only after a minimum of 45 earned leaves.

Regards,

Amit Seth.

Dear Sujatha,

Amit is right. If there is a policy that an employee has to accumulate 45 days of EL before they can encash that leave, but if their accumulated leaves go beyond 45 days, then they can encash those leaves. As you have stated, in the case of separation, the EL will be encashed. It's not the case that if their leaves go beyond 45 days, you have to encash the same. If we follow the policy that only at the time of separation will EL be encashed, then there is no concept of 45 days or so.

Regards, Mukesh

The issue is not clear. Usually, policy periods will not overlap. If you can share the existing leave policy as such, we will get more clarity, and then I can revert.

Dear Ms. Sujatha,

Every organization has its own leave rules. However, CL can't be accumulated or encashed, while SL can be accumulated to some extent. The encashment part is also subject to the company's leave policy, with most organizations not allowing encashment.

Regarding EL, it is allowed to accumulate, and generally, 50% can be encashed (a minimum of 15 days should be in reserve). This provision typically applies after completing 2 years of service. When an employee resigns or leaves the company, the total accumulated leaves will be encashed and paid along with the final settlement. Some companies have the LTA provision, requiring a minimum of 6/5 days of EL to be availed, and the same applies in case of encashment. All these policies are subject to the company's leave rules.

I believe I have addressed your query. If you need further clarification, please feel free to contact me.

Thanks and regards,
Kameswarao

Hi friends,

I have a doubt. Do we have to calculate the amount for EL taking basic salary alone or should it be the last pay drawn by the employee, i.e., the per day salary at the time of leaving us? How is it usually encashed?

G. Priya

Dear Mukesh Ji & Kameswarao garu,

Thanks for your immediate response.

Mukesh Ji, yes, I agree with you that "If we go by the company policy that only at the time of separation EL will be encashed, then there is no concept of 45 days or so."

If this is the case, I think most companies are following their own leave policies rather than the state leave rules or the Factories Act/ Shops and Establishment Act.

Aside to Mr. Kameshwar Rao:

Yes, sir, I understand your point regarding the minimum ELs in reserve before encashing ELs. But, is this the company's own leave policy or is it mentioned in the Factories Act as well?

In our organization, we have 6 CLs & 6 SLs per year, which are not carried forward or encashed, and 15 ELs/PLs. Regarding ELs, our company policy states the following:

- The entitlement of Earned Leave will be as per the provisions of the Factories Act, 1948.
- EL/PL shall be calculated at 1 leave for every 20 days worked by an employee in a calendar year.
- An employee will be eligible for EL only after working for a continuous period of 240 days in a calendar year. He will be eligible for the EL earned during the subsequent calendar year.
- Sundays, holidays, and other weekly off days falling within the period of Earned Leave are counted as part of Leave.
- Employees can accumulate Earned Leave up to 45 days. Encashment of Earned Leave will be allowed in case of separation of employees.

If every private firm is following its own leave policy, making changes to state leave rules/ Factories Act, then are the state leave rules/Factories Acts only for Govt. firms/employees? Do these acts serve as a base for all firms? Is there no need to follow the exact act by all?

Thanks & Regards,
Sujatha

Dear Ms. Sujatha,

Please go through the Factories Act as there is a provision for accumulation and encashment as well. When calculating 240 days, you should take into account the Earned Leave (EL) availed. The employee will receive leaves at a rate of 1 for every 20 days worked on the actual working days. In certain situations such as separations, we need to calculate the EL and make the payment as part of the final settlement. This also applies to casual workers.

Sundays and Holidays are not included in EL; they should be excluded, unlike in the case of Casual Leave (CL) and Sick Leave (SL). Each organization will have its own leave policies, but the amount of leave granted should not be less than what is specified in the Factories Act.

Regarding EL encashment, the employee should either be allowed to avail/encash or accumulate leave without any restrictions. It should not expire. Accumulation should be limited to avoid burdening the organization.

Thanks and regards,
Kameswarao

Dear Mr. Kameswar Rao,

Thank you so much for clearing my doubts, and yes, you are right - we should restrict the accumulation of ELs.

Thanks & Regards,
Sujatha

Hi Priya!

As far as I know, most companies calculate ELs based on the employee's last drawn basic salary per day, with only a few calculating it based on the last drawn Gross Salary. You can opt for the basic salary calculation to reduce costs for the company.

Thanks & Regards, Sujatha

Dear All,

Sick leave (SL) can be accumulated until it reaches the number of 21, including the SLs from that year. However, SL cannot be encashed; this restriction is detailed in the Factories Act as well.

Earned leave (EL) is paid at the last drawn basic salary only. Sujatha rightly mentioned that some companies pay it at the gross salary as well.

Regards,
Amit Seth.

Dear Sujatha,

You can do one thing, just put the leave policy act in front of your management and negotiate with them. Inform them that whatever we have been doing is an unfair labor practice. The labor inspection officer can bind us to implement the leave policy as per the act with notice.

Do one thing, if your management says at the separation we will encash the EL, then as and when an employee's EL becomes due, you can sanction their earned leaves and let them go for leaves after reserving 45 days' leaves as per your policy.

Regards,
Mukesh