Is Our Leave Policy Fair and Compliant? Seeking Advice on Proposed Changes

Dear Senior members of CiteHR,

Request a judicious response from you all regarding the issue mentioned below:

We are an IT organization with 125 employees. Our existing leave structure consists of 12 CL (Casual Leave), 5 PL (Privilege Leave), 1 RL (Religious/Restricted Leave), and 15 SL (Sick Leave) per year for executive and lower management personnel (total 33 leaves). For middle and higher management personnel, the allocation is 24 CL, 5 PL, 1 RL, and 15 SL (total 45 leaves).

CLs, Comp offs, and PLs are encashable at the end of the financial year based on the gross salary. Only PLs can be carried forward if not encashed.

My queries are:

1. Is this policy in line with industry standards and statutory compliance?
2. Should leave encashment be based on basic salary, and should CLs expire if not utilized by the end of the year?
3. I have proposed a new policy of 30 days consolidated annual package leave (2.5 days per month) for all employees throughout the organization. This change aims to streamline HR logistics and reduce the total encashment amount at year-end. Is it viable for a company like ours, and what are its potential advantages and disadvantages?

If my suggestions are incorrect, please recommend alternative options for an appropriate leave policy.

Looking forward to your responses.

Dear,

In my view, you should encash PL rather than CL. The first time I have seen PL is under 10.. but again, leave policy varies by org. As you are saying you have proposed a new policy with 30 days of leave, my suggestion would be PL-18, CL-6, SL-6, and you can accumulate PL up to 30/35/40. It was just a suggestion. People might have different perceptions here, so it is up to you.

Regards
Vipin8)8)

Dear Anu,

I agree with Vipin; 5 days of PL is too less. You can have 12 days of PL: 1 PL for each complete month, 6 days of CL, and 6 days of SL. Unutilized CL should lapse. SL can be carried forward and accumulated for 30 days but should not be encashable. PL can be accumulated for 30/40/45 days and can be encashed.

Regards,
KP

Dear Anu,

This is my view,

1. If your leave management process is manual, go for a standard leave policy across all levels so that handling becomes easier. If a Leave and attendance software system is in place, then you may have different categories based on level, left to management decision.

2. You can have 18 days of Privilege Leave/Paid leave per annum (1.5 days per month), 6 days of Casual leave, and 6 days of Sick Leave.

3. Define a policy to encash only Privilege/Paid leave. Leave encashment on gross pay will result in a huge cash outflow to the organization. It’s better to have it based on basic pay.

4. If you define sick & casual leave policy as non-encashable & non-carry forward, then there will be many people availing leave at the end of the leave year (calendar/financial year), which will result in a loss of productivity. So, Sick leave can be made carry forward up to a defined period or a certain number of days and lapses at the end of the defined period/days.

Regards,

Lakshmi.

Hi Anu,

As you mentioned that you want to implement 2.5 days of flat leave per month, considering a year has 30 days. Before implementing this, you need to calculate the production hours. Based on my calculations, if you have 8 working hours per day, you would lose 20 hours in total. If your organization follows a 6-day workweek, allocating 2 days of leave per month may not pose a significant issue. However, if you operate on a 5-day workweek, granting 2 days of leave per month could result in a substantial reduction in production, affecting half of the workweek. This could lead to significant losses in production, especially during this recession period.

Please consider these factors before making a decision. Let me know if you need further clarification or assistance in this matter.

Thank you, Siva Kumar, for your response. We are working six days a week, with nine hours from Monday to Friday and six hours on Saturdays. However, alternate Saturdays are off. According to your analysis, it should work. What do you say? Even Lakshmi has shared a brilliant idea on this. Since we handle the leave management system manually, I was wondering if the "All-purpose leave" policy (30 or 24 days/year) can work. As far as I know, it is one of the latest trends that many companies across the service industry are following.

Best Regards,
Anu

If you have determined that it is good and the policy also applies, when allocating leave to employees, you need to consider the task and the stage it is in. If it is a crucial time for the project, it is very important.

Dear Anu,

Very nice leave policy for employees, but not favorable for the employer and not in accordance with statutory requirements. Generally, the rule states that for every 20 days worked, one PL or EL (Earned Leave) should be granted. The encashment of PL can be done for a maximum of 30 days/60 days as determined by the management. Leave encashment is typically calculated based on the basic salary and not the gross salary. It is at the discretion of the management to pay based on the gross salary.

CL should be 6 days per year on a pro-rata basis and is not encashable (0.5 days/month) and cannot be carried forward to the next year. Sick leave is at the discretion of the management and is not encashable. For sick leave exceeding 3 days, a medical certificate proving the genuineness of the illness should be provided.

Regards,
Arasu

Hi Husna,

According to the 1961 Maternity Act and the 1948 ESI Act, a woman employee is entitled to 12 weeks of maternity leave under normal circumstances provided she has served the organization for at least 180 days.

Hi Shiva,

I think as per the Maternity Benefits Act, 1961, the eligibility is that the female employee should have worked in the organization for at least 80 days (and not 180 days) in the twelve months immediately preceding the date of her expected delivery. Could you clarify this? Please correct me if I'm wrong.

Regards,
Anu

Hi Anu,

It's right, it is 80 days, not 180 days. Whereas, the leave policy (PL/EL, Maternity, Paternity, Adoption, etc.) shall be applicable to permanent employees, not for trainees (on probation), contractors, or consultants. In line with this, the normal probationary period would be 6 months, which is 180 days. Therefore, a female employee must work for at least 180 days to be eligible for maternity leave or in case of a miscarriage, etc.

We have to be very cautious when documenting such policies as they may cost the company.

Please clarify or correct me if I'm on the wrong path.

Regards,
Shiva

Yes, Shiva, I do agree with you. But if any such case happens where the female employee is bound to take leave during the 6-month probation, it should be treated as a special case on humanitarian grounds. What do you say?

Yes, Anu, we can! But do you think investing three months' salary, leave, and empty timesheets on a newcomer is a good practice?

Regards,
Shiva

Hi Shiva,

How can we extend three months of maternity leave to six months? Is there any notification from the government based on which we can do so? I have seen several companies giving maternity leave for six months. On what basis are they providing it?

HR

Dear Guest (HR),

The number of leaves (any type such as CL, PL, SL, EL, Maternity, miscarriage, etc.) is at the sole discretion of the management. The law mandates maternity leave. Additionally, a female employee can also avail of miscarriage leave, adoption leave, and sick leave.

As per the law, maternity leave is only 12 weeks but can be extended depending on the management's decision.

Regards,
Shiva

Hi Anu, Dhanasekhar, and Ambi,

Please acknowledge if you have received the document. Also, I am requesting you to send the refinements.

Regards,
Shiva