Employee Resignation After LTA Claim: Should We Recover the Balance?

I would like to know if an employee has claimed his LTA for the financial year and then resigns in a few months, should the company recover the balance amount for those months with or without interest? Please advise ASAP.

This depends on company policy. As per my knowledge, you cannot recover LTA once it has been given and the individual has availed the benefit of it through travel.

Thanks, Atul, but he has claimed LTA for the current year, April 2012 - March 2013, and is leaving in December 2012 before completing the financial year. So, should we not recover the amount paid for three months, i.e., Jan-Mar 2013?

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Regards

There must be some company policy on recoveries, and once given, you cannot claim it back.

LTA Benefit and Recovery

LTA is a benefit claimed as per the IT tax for exemption. Please recover without interest on a pro-rata basis.

Regards,
Vinod Bidwaik

Since LTA is a fixed amount that is paid once a year (financial year between April to March), if an employee has claimed their full LTA and leaves the job before the completion of the year, LTA can be recovered on a prorated basis. This is an established practice observed by all good HR-driven companies.

Regards,
Rakesh Pd Srivastav

Yes, Jyoti, it can be recovered from the employee in case he/she claimed LTA for the next financial year. You have all the rights for that, but you should have it somewhere written in your company document where this policy is stated. There is no specific rule for LTA; it varies from organization to organization. You can do things as per your company's requirements.

Keep Smiling~

Pro-rata Deduction of LTA for Resigning Employees

Normally, if an employee leaves after availing LTA for the full year, you can deduct on a pro-rata basis. It is a general practice. You may include the same in your policy and appointment order as well.

Further, this benefit is on an annual basis. No one can claim for the whole year while working only part of the year unless your policy guidelines are as such. Charging interest in such a scenario is unfair.

Regards

This may help you make better and more informed decisions.

1. Category of employee: Is he in the executive cadre? If yes, then LTA may be a part of his CTC. Committed CTC/12 is his eligibility. If altogether he has received more than the entitled amount, please recover.

Regards,
Shailesh Parikh
Vadodara (Gujarat)
[Phone Number Removed For Privacy Reasons]

Yes, as an industrial practice, LTA is recovered once an employee separates from an organization for the remaining period of the month on a pro-rata basis, and your organization is correct on this. Normally, there used to be a written policy on it in every company. However, I have not heard of recovering interest for this. You may check with your policy, and if it is written in it, you have to accept it. Wish you good luck in your future venture.

LTA Payment and Company Policy

LTA is usually paid for the previous financial year's service and is paid at the beginning of the current financial year. For example, if an employee worked from 01-04-2011 to 31st March 2012, they are eligible for LTA in the year 2012-13. However, it depends purely on each company's policy.

As per my knowledge about the rules followed by most companies, even if you have paid for ADVANCE LTA and the employee has availed it and submitted relevant documents, you cannot recover the same. If attempted, it may harm the reputation of the company, and dealing with interest payments is a strict no-no.

Regards

We pay LTA as per our HR Policy, streamlined with Management's approval. LTA is one of the benefits to the employees for the services rendered to the company; once paid, it will not be recovered.

Few companies will pay LTA for the completed financial year as a benefit to the employee. If you have paid for the current financial year, then as per your policy, you can deduct LTA for the remaining months on a prorated basis. Charging interest on LTA is not in practice.

Regards

Unless it is specifically mentioned in the service conditions, the benefit will be in favor of the employee. Here, we should remember that the person became an ex-employee, and he can take the case to court, causing the firm to lose a lot of money in contesting the case. Secondly, unless there is a specific condition for recovery, even a court of law will not be able to give a favorable judgment.

Understanding Leave Travel Allowance (LTA) Recovery

LTA is a part of the salary package paid to an employee. To reduce the income tax burden, a certain portion of the salary is paid in the name of LTA. If LTA is paid in advance, it can be recovered from the concerned employee. There is no rule for recovering interest on that payment. Imposing interest depends upon the discretion of the management.

From an HR standpoint, interest should not be imposed because it will send a wrong message to other employees, leading to dissatisfaction among them.

Regards

As per IT rules, LTA tax exemption is on a calendar year, not on the financial year. Pro-rata LTA is the industry practice.

Thank you.