Leave Encashment: Is It a Legal Requirement or Company Discretion?

Is it necessary for a company to pay leave encashment as per law, or is it their will to decide to pay or not to pay?

As per the provisions of the Factories Act, one leave with wages is to be paid for every 20 days worked. According to the company's policy, the ceiling limit for the accumulation of earned leaves (ELs) will vary, for example, 30, 60, 45, etc. Beyond this ceiling, employees will have the option to have their leaves encashed upon submission of a request letter to the management.

I hope this information is clear to you.

Regards,
PVVB KUMAR

Please see Section 79 of the Factories Act, 1948. Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed, during the subsequent calendar year, leave with wages for a number of days calculated at the rate for an adult: one day for every 20 days of work performed by them during the previous calendar year. Also, see subsection (5).

Please refer to your standing order to determine the types of leave and the number of days you are actually providing.

Regards

Please inform if we have to consider leave entitlement based on the Factories Act, 1948 (Sec 79) or the Shop and Establishment Act applicable for the said location.