Need Urgent Help Understanding EL Encashment Rules in Factories Act 1948 – Can You Assist?

Hi All,

Greetings,

I need full details of EL Encashment in the Factories Act 1948. Please help - Urgent.

Regards,
Kanaka

Dear Kanaka,

Please refer to your State Rule along with the Act to get a complete picture.

Regards,
SC

Guidance on Leave Encashment Under the Factories Act-1948

Please guide us on how to calculate leave encashment under the Factories Act-1948. Earlier, we used to calculate leave equivalent to one day's salary because we didn't have any leave policy or procedure.

Regards

In Gujarat, we calculate leave based on 20 days. If an employee works for 240 days, they are entitled to 12 days of leave. The leave calculation is done on a calendar year basis, and encashment is processed in the December salary.

Leave Entitlement vs. Encashment

It is leave entitlement and not encashment. Encashment comes only at the time of separation of an employee's service.

Leave Calculation Under the Factories Act

Under the Factories Act, methods of calculating leave are different for employees already on the payroll on 1st January in the preceding year and for employees who join after 1st January in the preceding year.

In the case of the former, the employee will be eligible for 1 day of leave for every 20 days worked if they have completed 240 days in the preceding year. In the case of the latter, the employee will be eligible for 1 day of leave for every 20 days worked if they have worked for a minimum of 2/3 of the total days from their date of joining.

Of course, the rate of 1 day for 20 is statutory. You may give 1 day of leave for, say, 18 days.