Hi Rahul,
A lot many people have stated that the leave entitlement is based on the organization’s leave policy / standing orders; the argument is that the leave policy will also derive it from some where, and as we know it is either the Shops & Establishment Act or the Factories Act. Which means that it is a statutory requirement, as also stated by Arif.
If you go through both the acts, the leave entitlement part of the Shops & Establishment Act, seems to have been derived from Factories Act so it does not make a difference whether you are governed by Factories Act or the Shops & Establishment act, as far as the basis of leave rules is concerned, except for certain things.
Section 79 (1) of the Factories read as under
Every worker who has worked for a period of 240 days or more in the factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for the number of days calculated at the rate of -
Adult - 1 day for every 20 days of work performed by him during the previous calendar year
Child - 1 day for every 15 days of work performed by him during the previous calendar year
This actually means that during the first 240 days (typically the probation period) the law says no EL or PL (you may use any nomenclature as far as the definition satisfies annual leave with wages).
However, law always prescribes for a minimum benefit so if the organization decides to credit EL or PL on successful completion of the probation (on confirmation) the action is justified at the same time the reverse will be unlawful.
Further, Section 79 (3) of the Act states
If a worker is discharged or dismissed from services or quits his employment or is superannuated or dies while in service during the course of the calendar year, s/he or heir or nominee, as the case may be, shall be entitled to wages in lieu thereof .......
This is why encashment of the EL or PL is statutory; again the law does not stop from encashing CL or SL. In the case put up by you, since the person is under probation, which means he is yet to earn the EL or PL, there will be no encashment as per the act.
Normally in order to adjust the shortfall of the Notice Period we adjust unavailed PL or EL which is unlawful. Please refer Section 79 (12) of the Act which reads as
The unavailed leave of a worker shall not be taken into consideration in computing the period of any notice required to be given before discharge or dismissal.
In this case logically one should encash the EL or PL and recover the notice period, e.g.
EL - 20 days Shortfall of notice 15 days instead of encashing 5 days of EL encash 20 ELs and recover for 15 days shortfall, now this is lawful.
Hope this will be of some help.
Best wishes,
Sunil Joshi
PGCHRM - XLRI