Contract Labor Leave Encashment: Should We Pay Leave with Wages Monthly?

I want to confirm the exact rule for the contract labor leave encashment. Is it advisable to pay leave with wages every month for contract labor?

Also, what would be the exact calculation base for the same?

I am having the same problem in this regard. Please let me know whenever you get any suggestions or feedback from the seniors. I will be thankful to you.

Regards,
Mayur

The problem occurring is that a few people are giving it annually, while some companies are giving it monthly. Some are following 5.76% of BASIC+DA, and others are basing it on the per-day payment, including all salary emoluments. Which would be the exact method? Also, we need to have the correct supporting document for whichever method we are following.

Regards,
Pravin

To pay EL encashment, the worker has to work for 240 days in the year. As such, you can calculate the EL at 1 leave for every 20 days and it can be paid in January for every completed year. The maximum EL would be 15 days in a year, and the calculation is monthly wages divided by 30 multiplied by the number of eligible leaves for that year. This is specified in the Factory Act.

Regards,
AVGN Vara Prasad.

We have to follow the system which is more beneficial to workmen. Since the tenure of contract workmen is uncertain and may even cease before the eligibility period of 240 days, it is better to reimburse 1.5 days' wages per month along with monthly wages and reflect it in the wage register; there is nothing wrong with this approach. Even the eligibility period of 240 days is being recommended to be reduced to 90 days in the upcoming amendment to the Factories Act.

There is no specific period to pay EL encashment. It can be paid in any month as per company policy. Most companies will pay during March to align it with the end of the accounts.

Understanding EL Encashment

EL is not a maximum of 15 days; it is to be a minimum of 15 days as per the employer's discretion. Employers can credit up to 30 days of leave in the register. The calculation is as follows: for example, Basic + DA/26 * number of EL encashment.

For instance, Basic 5000 + DA 500 = 5500/26 * 30. The resulting figure will be the encashment amount. For that, a mandatory 240 days are required. Let me post the details in the next message.

Regards

You know very well that every rule and regulation is the same for annual leave with pay for both permanent and contract labor. As per the Factory Act 1948, earned leave (EL) is calculated after 240 days and can be taken a maximum of three times in a calendar year. In the case of encashment, it is applicable under the following circumstances:

1. Termination
2. Resignation
3. Death
4. Superannuation

Regards,
Nagendra

You are not providing the right answers. Please never give incorrect information to anyone. I am telling you the correct answer.

Contract Labor Leave Encashment Under C&L Abolition Act

Under the C&L Abolition Act, the contractor must pay the leave amount to every employee. This amount will be calculated for the calendar year and must be paid in January only, at any cost. Otherwise, the contractor will be penalized.

Calculation of Leave Amount

- For Earned Leave (EL): Working days/20 * last basic drawn/26 (as per the Factory Act)
- Under the Shop Act: Total EL is 15, calculated the same way as under the Factory Act.
- Other: 14 leave days for Casual Leave (CL) and Earned Leave (EL), calculated as last basic/26 * 14.

Please ensure compliance with the regulations mentioned above. Thank you.

Thank you for sharing. The intention behind paying monthly leave encashment is to ensure that the contract laborer receives more in hand. My query is, is this acceptable as per the law? Also, are we sure that we need to consider only the Basic + DA or all the components?

Regards,
Pravin

The amount of leave payable is only in January. If you pay monthly, it is not covered under the CL Act or any other law. The employee can only avail leave every month; they cannot receive any amount. It is payable only on basic + DA, but the basic + DA must be equal to or more than the minimum wage in the state. For any other queries, discuss with me by telephone.

Thank you.
Regards.

Leave Encashment Conditions

Leave encashment will be given in the following conditions in every situation:

• In Employment
Excess earned leave (EL) from accumulations (accumulation is based on state rules for it).

• Leaving Employment
In case of leaving the employment (resignation, termination, death, superannuation), a simple formula is applied: Basic pay + Dearness Allowance (DA) (not less than minimum wages applicable) divided by 30, then multiplied by the number of encashable ELs.

Regards,
Accord Services (Labour Laws Consultant)
Noida
Phone: [Phone Number Removed For Privacy Reasons]

Earned Leave Calculation Under Factories Act

As per the Factories Act provisions, earned leaves are to be calculated on a calendar year basis. These leaves can be accumulated up to 30 days, and the balance is to be paid in January. The total amount paid will be shown in the annual return under Form No. 21, which is required to be sent to the Chief Inspector of Factories by the 15th of January each year.

Regards

Eligibility for EL Encashment

To pay EL encashment, the worker has to work for 240 days in the year. You can calculate the EL at 1 leave for every 20 days, and it can be paid in January for every completed year. The maximum EL would be 15 days in a year, and the calculation is monthly wages divided by 30 and multiplied by the number of eligible leaves for that year. This information is outlined in the Factory Act.

Calculation of Wages for Contract Employees

Normally, the monthly wages will be divided by 26 days to calculate the one-day wage. All contract employees are eligible for one day leave for every completed day of work. In the case of any holiday, that too should be calculated for counting the working days if the employee worked on the previous day and the next day of the holiday.

Regards,
Pravin

Please confirm for me whether EL encashment wages are divided by 30 or 26 and if the EL encashment amount is under PF contribution or not, and why it is or isn't. It is very confusing for me. If you have it in writing, please send it to me.

Regards,
Nagendra

Please go through the link below for information on leave encashment for contract laborers: bcic.org.in.

Regards

Dear All,
There is no provision for leave under the Contract Labour Act (CLA) as CLA defines short-term employment. If we are employing contract labour for a long duration, even under CLA, they have the privilege to get leave as per the Company's Standing Order, Shops and Commercial Establishment Act, or Factories Act. Alternatively, they may receive leave encashment benefits as defined under the Standing Order or Act as applicable.

Regards,
Ajay Morolia

There is no provision for leave under the CLA because the CLA defines employment of short tenure. If we are employing anyone under the CLA for a long duration, they are entitled to leave as per the Standing Orders, Shops and Commercial Act, or Factories Act, as applicable.

Regards,
Ajay Morolia

Dear Seniors, my query is whether employees can carry forward their leave days to the next year or if the unused leaves will lapse. Please advise.

Regards,
Prasad

Dear All,

As per the Contract Labour Act, there is no provision for leave with wages or leave encashment. In this case, how can we provide leave with wages to contract labour? Additionally, if we keep them for 480 days, we will have to confirm them as regular employees according to the Conferment of Permanent Status Act.

Since we are employing contract workers on a daily wage basis, why should we provide leave encashment to them? Please share your thoughts.

Hello Friends,

Is there any written rule if Leave Encashment should be done on Basic + DA or on Gross Salary per month? Please share if you have this information in writing.

Hello Friends,

Is there any written rule regarding Leave Encashment, whether it should be based on Basic+DA or on Gross Salary per month? Please share if you have this information in writing.

If leave with wages is paid monthly, does it require to be considered in PF calculation.

Hello friends,

Is there any written rule regarding Leave Encashment when it is done in the salary per month? Please share if you have this information in writing.