Managing Accumulated Paid Leaves: How Should We Handle Cash-Outs When Employees Quit?

We are a media company. We provide the following leaves per year:
- SL: 7
- CL: 7
- PL: 30 (2.5/month)

Currently, there are employees who have accumulated more than 30 PLs. Some employees have 80-90 PLs in their account. Please suggest how many leaves can be cashed out when an employee quits. Is there a specific policy regarding PL leave management according to government rules?

Thank you

There is no law on how much leave has to be encashed. It is the company that has to decide when forming a leave policy for its employees. You can state in your leave policy that PLs can be carried forward and set a limit. Any excess leave beyond the set limit will automatically lapse.

Regards,
Janaki H C

AFAIK, PL/ELs are not lapsed automatically but are encashed automatically beyond the threshold limit. Please note that the accumulated leaves are Earned or Privilege Leaves, and it is not fair to lapse such leaves. I do agree on the lapse of CLs or SLs but not PLs. In my company, the unavailed CLs are also encashed at the end of the year.

Pon

Paid Leave (PL) Carry Forward and Encashment Policies

Most companies have a rule specifying the maximum number of days for which paid leave (PL) can be carried forward; any remaining days must be used or will lapse. There is no provision in the law for the encashment of leaves, as it goes against the spirit of general provisions in labor acts. The primary intention is to provide employees with time off for rest, recreation, and personal matters rather than additional monetary compensation. Setting a cap on carried forward leaves aligns with the policy encouraging employees to utilize their leave to prevent overworking and burnout.

According to a forum post by pon1965, Paid Leaves (PL) or Earned Leaves (ELs) do not lapse automatically but are encashed automatically once they exceed the threshold limit. While it may be reasonable to lapse Casual Leaves (CLs) or Sick Leaves (SLs), the same treatment should not apply to PLs. In their company, unutilized CLs are also encashed at the end of the year.

Please note that the accumulated leaves are Earned or Privilege Leaves, and it is not fair to lapse such leaves. I do agree on the lapse of CLs or SLs but not PLs. In my company, the unavailed CLs are also encashed at the end of the year.

Regards,
Pon

Okay, the Factories Act also states generically that not more than 30 PLs can be carried forward. Can you shed some light on the leave encashment of government employees at retirement? If I am not mistaken, 10 months of leave are encashed in the case of Punjab government employees, and the same applies to central government employees. Under which rule is this done?