Is It Fair to Change Our Leave Policy? Seeking Advice on Carrying Forward Unused Paid Leaves

Hello everyone, is it mandatory for any company to carry forward the unused paid leaves of an employee to the next year, or does it differ from company to company?

We are a pharmaceutical KPO. We had a policy of carrying forward leaves to the next year in case they are unused at the end of the calendar year. We also had an option to encash the number of paid unused leaves above 30 at the end of the year. However, the excess of 60 shall lapse.

However, employees have started taking short leaves instead of using their paid leaves. Short leave means they exit early or come late for an hour or so and compensate for it later in the week. This way, many of them have accumulated their paid leaves and have reached a number of 40-50 unused paid leaves. This has led to a situation wherein the company needs to pay them the salary for 10-20 days if they ask for encashment.

Now, we have decided to amend the policy of carrying forward paid unused leaves to the next year to motivate them to use their leaves instead of accumulating.

Question on Leave Policy Amendment

One more question, can we tell the employees that the unused paid leaves at the end of the year shall lapse, or are we bound to encash them at the end of the year? Your suggestions/comments will be very useful.

Thanks.

Dear Jyoti, According to the State Shops & Establishment Act, you are required to carry forward earned leave (EL) up to a certain limit as prescribed under this Act. Both parties have agreed to the system of encashment and accumulation of leaves, making it a condition of service in your establishment. We are not obligated to encash the EL at the end of the year or every year. According to different Acts, we are required to encash the remaining EL while making the full and final settlement, up to a certain limit as per the applicable law. If the employees of your KPO fall under the definition of an employee as provided in the Industrial Disputes Act, 1947, then you must give a 21-day notice regarding any change in service conditions as per section 9A of this Act. Please try to resolve the matter with your employees. Opinions/comments submitted as requested.

With Regards,
R.N.Khola

Dear Mr. Khola,

We are a startup e-commerce company in Pune and expect to have around 50 employees by the end of February. I would like to learn more about the point you mentioned above, i.e., "According to the State Shops & Establishment Act, you are required to carry forward earned leave up to a certain limit as prescribed under this act." Could you please clarify how many earned leaves/personal leaves need to be mandatorily carried forward as per the Bombay Shops & Establishment Act?

Thank you.