Is My Friend Entitled to Leave Encashment After 7 Years? Understanding Legal Obligations

One of my friends has been working for 7 years in a company with its head office in Tamil Nadu State. Which state act will apply to his company? Does he have the right to leave encashment as he has more than 150 PL balance? When he tried to seek clarification from the company's HR, they mentioned they don't have a policy for leave encashment. Is there any legal obligation on the employer to do so, or can they simply refuse?

I have searched your website extensively but could not find the desired reply. Kindly inform me about the legal obligations of the employer regarding PL encashment.

It depends on the company's policy whether they encash PL during the service or not because there is no provision under the Factories Act 1948 to encash PL during the service period. However, employees are allowed to accumulate unavailed leave for a maximum of up to 30 days in the case of adults and forty days in the case of a child.

At the time of leaving the job due to superannuation, death while in service, discharge, or dismissal from service, the employee shall be entitled to wages in lieu of the quantum of leave to which he was entitled. While preparing the Full and Final statement, all remaining PL should be encashed.

Regards,
Shaukat Hussain

One of my friends has been working for 7 years in a company with its head office in Tamil Nadu State. I am wondering which state act will apply to his company. Does he have the right to leave encashment as he has more than 150 PL balances? When he tried to seek clarification from the company's HR, they mentioned they do not have a policy for leave encashment. Is there any legal obligation on the employer to do so, or can they simply refuse?

I have searched your website extensively but could not find the desired reply. Kindly enlighten me on the legal obligations of the employer regarding PL encashment.

PL Encashment Obligations

PL encashment is mandatory at the time of retirement or leaving the service. The employer is required to provide it.

Regards,
Dilip

Thank you for your response. However, I would like to clarify whether there is any statutory obligation on the employer to encash the remaining PL at the time of leaving the company. Furthermore, please assist me in determining which part of the salary should be considered when calculating the PL encashment amount as per the Factory Act.

Calculation of PL Encashment

Is it the basic salary + DA / 26 * number of PL days? Is this the maximum possible amount, or is there any legal provision that supports the calculation of the full salary / 30 * number of PL days?

Calculation of Leave Encashment

It will be on Basic + DA / 26 or 30 (depending on how he has been paid monthly for 26 or 30/31 days).

PL Encashment at the Time of Leaving Service

PL encashment is mandatory at the time of leaving service. If any employer is denying this, the employee may contact the labor commissioner's office of that province. It is always advisable to discuss this matter while negotiating salary during the interview.

Regards,
Dilip Bhandari
[Phone Number Removed For Privacy Reasons]

It is a statutory requirement for the employer to encash PL as per the Factory Act and Bombay Shops and Establishment Act. Now, your question about calculating the amount to be paid—whether it should be based on Basic/26, 30, or 31. In your organization, if you deduct 1 day's salary as LWP by dividing it by 26 to arrive at 1 day's salary, then you should encash PL by dividing BASIC + DA by 26 days.

I hope this clarifies matters.

Regards,
Dilip Bhandari
HR Manager
Rajhans Group of Industries
[Phone Number Removed For Privacy Reasons]

Still not clear about the statutory obligation of the employer for EL encashment. Is it mandatory for the employer to encash the EL/PL balance at the time of exit?