Is Your Earned Leave Being Unfairly Prorated? Let's Discuss Its Impact on Employee Rights

I have gone through the relevant provisions of the Shops and Establishments Act (TN) and also the Factories Act.

Fact 1: Earned leave is payable only when an employee completes 240 days of continuous service.

Fact 2: This continuous service includes the number of days spent on "probation."

Fact 3: Organizations cannot fix the probation period as one year and escape the EL liability.

Fact 4: In almost all organizations, an employee is not entitled to any earned leave in the first year of service because technically, he has not earned any leave in the previous year.

Fact 5: If an employee has completed one year of continuous service, he becomes eligible for the number of days he/she is entitled to, as per the company policy.

Fact 6: Once a specific number of days are earned by the employee, companies/establishments/organizations have to credit that many numbers of days (xx days) in advance in the subsequent year(s).

Fact 7: The law specifically says that the employee is entitled to xx number of days in the subsequent year, but

Fact 8: The law does not specify that xx number of days have to be credited upfront in the subsequent year(s).

Fact 9: This allows some employers to resort to something called "pro-rated" credit every month.

Fact 10: This practice takes away the rights of the employee to avail the leave he/she has earned in bulk to go on vacation, etc.

This defeats the very purpose of granting earned leave, which is giving the opportunity to the employees to de-stress themselves after one year of hard work.

Comments are welcome.

Regards,
B S Balaji, MBA, LL.B.
Not practicing now.

From your post, it is not clear whether your question is a query or a discussion. However, the word "EARNED" is in the past tense, which denotes something that happened in the past. Accordingly, organizations are free to give credit for earned leave after it is actually earned by rendering the requisite service by the employee, making them eligible for that kind of leave. Even otherwise, leave cannot be claimed as a matter of right whenever the employee desires. Except in emergencies, leave is granted at the convenience of the employer when they feel that the interests of the organization's service would not be harmed in the absence of the employee being on leave. Therefore, neither the rights of the employee are infringed, nor does it defeat the purpose of granting earned leave.

The employer, however, has the discretion to credit the leave in advance of actual earning. For example, in government departments, earned leave is credited in advance every six months, which an employee can avail any time during that period. If the employee leaves the department, the amount equivalent to the minus credit is recovered from their full and final settlement. Governments have adopted this policy as almost none of the employees prefer to leave a government job. However, in companies, most employees try to leave their job when they get an opportunity to grab another attractive job.

Regards

Thank you, Mr. Dhingra, for replying to my post. Mine was intended to be a discussion and not a question. I agree with you that employees cannot claim leave as a matter of right. It is a right nevertheless, in the sense that the employer is required to grant leave as provided by the relevant statute, provided:

1. The employee plans sufficiently in advance and notifies the employer about their intention to go on leave (which many companies call planned leave).

2. The employer also cannot refuse leave without reasonable grounds.

The substance of my post was to indicate that many employers do not give credit for leave earned after one year—240 days of continuous service. Many employers have devised their own policies to the effect that for the first year of employment, employees are not entitled to any Earned Leave (EL) at all.

From the commencement of the second year onwards, they give earned leave credit prorated every month. For example, many companies follow this:

Example of Leave Policy

Employee: A
DOJ: 01.01.2012
Leave Policy: 12 days EL per year (the minimum required under TN S&E Act, 1947)

On 01.01.2013: EL Opening Balance = 0, fresh credit of EL earned in 2012 = 0
On 31.01.2013: EL Opening Balance = 0, EL credit for January 2013 = 1 day, Closing Balance = 1 day

Whereas, it should be:

On 01.01.2013: Opening Balance = 0, Fresh EL Credit for 2012 = 12 days, Closing Balance = 12 days.

I am not dwelling on how this leave can be availed, how early the leave request must be submitted, etc. Please comment.

Your observation, as "On 01.01.2013 - Opening Balance=0, Fresh EL Credit for 2012=12 days, Closing Balance=12 days," is quite correct. It should be like that only. Credit at the close of the year is a must.

Do not mind, friends. If I am wrong, please let me know. It is actually wrong as per the Act. The use of multiple question marks is unnecessary. No company engages in such practices and should not do so. If any company is breaching regulations, it must be addressed.

Best Regards,
Nandan S Negi

Sure, many companies do this. In fact, I have advised one of the companies to immediately change their practice!