Leave Encashment Confusion: Can Casual Leaves Be Cashed Out in Software Companies?

Dear all, please help me with the following queries:

We are a software company with 50+ employees. I would like to know the following information:

1. Is the employee eligible for leave encashment when not serving the notice period?

2. We have 10 national holidays, 15 casual leaves, and 5 sick leaves per year. We recently announced leave encashment for the casual leaves on a yearly basis. I read in the forum that CL's cannot be encashed, but my employer has announced leave encashment for up to 10 CL's per year. Is this policy allowed in software companies, and can anyone help on this?

Thanks in advance.

As per normal practice, leaves can be adjusted against the notice period during the full and final settlement of the employee. It can also be negotiated against the notice period with the agreement of the reporting managers. If the employee has served the complete notice period, then these leaves get encashed.

Encashment of Casual Leaves (CLs)

CLs do not generally get encashed, but it also depends on the company policy. In your case, as laid down by the employer, they can be encashed for up to 10 CLs per year. This is a good practice as it encourages employees to be regular and not take unnecessary leaves. It's also an added benefit to the employees' kitty. Highly appreciated!

Hope I answered your question :)

Regards,
Nisha

Your answers in BOLD:

1. Is the employee eligible for leave encashment when not serving the notice period?

Yes, the employee is eligible for leave encashment. However, when you are making the full and final calculation, remember to deduct the leave encashment amount from the amount due by the employee to the company. The notice period cannot be adjusted with the leave since the leave encashment will be done in Basic+DA salary, and the notice period will be calculated in day salary. The appointment letter clause is crucial here. Do not encourage adjusting the notice period with leave since the notice period is when the employee has to hand over their duties to another person, and the HR department hires a new person for their replacement.

2. We have 10 national holidays, 15 casual leaves, and 5 sick leaves per year. We recently announced leave encashment for the casual leaves on a yearly basis. I read in the forum that CL's cannot be encashed, but my employer has announced leave encashment for up to 10 CL's per year. Is this policy allowed in software companies, and can anyone help with this?

You can change/rename CL as PL/EL (Privileged or Earned leave).

Leave policy for your reference: India leave policy

Hello! If you give us clarity on the company policy or clause of your appointment letter for the same, that can fetch you an even better response.

Response to Queries on Leave Encashment

The answer to both your queries goes like this:

1a. When an employee is NOT serving the FULL notice period:
- Not eligible for F'n'F and, therefore, NOT eligible for Leave Encashment.

1b. When an employee is serving a PARTIAL notice period:
- Calculate his dues (salary + reimbursements if any + leave encashment + Bonus - TDS) and ADJUST / DEDUCT the notice pay for the period not served.

1c. When an employee serves the FULL notice period:
- Entitled to Leave encashment as a part of F'n'F.

1b & 1c are to give more clarity.

Policy on Leave Types in Small IT Companies

2. In such small IT companies, they are least concerned with the names of leaves. You, being responsible, can either change the name to PL or EL. Else continue with the same. But make sure that when your company grows and introduces PL, CL & SL altogether in the future, you have a clear drafted policy with rules for each type.

Hope this helps.

Regards,
Hiral

Thank you for all the suggestions; they were really useful for me to learn and implement. My employer has asked me to collect samples of a few companies' leave policies, especially regarding national holidays. Can anyone help me with this? How many national holidays can be given to a software company with 60+ employees? Can I get some sample companies?

Thanks in advance.