Leave Encashment Dispute: How Should We Handle Villagers' Strike Over Wages?

Issue Regarding Leave Encashment

I have an issue regarding Leave Encashment. I need suggestions on the case described below.

We are a construction company, working on a steel beneficiation plant. Our plant is surrounded by four villages with approximately 2,200 residents, out of which 800 are land losers. Since the beginning, for about 2.5 years, we have been providing monthly wages to all 2,200 villagers, categorizing them as Unskilled, Skilled, Semi-Skilled, and Highly Skilled as part of our peripheral welfare activities. The wages are paid according to the government-prescribed rates. It is important to note that not all 2,200 villagers are employed by us.

Currently, the villagers are on strike demanding Leave Encashment for the past 2.5 years during which they have been receiving wages. My query is whether there is any standing order act applicable to the aforementioned issue. If so, what are the regulations, and based on what criteria are we required to make payments?

Thank you.

Regards

Leave Encashment and Statutory Rights

Leave encashment is not a statutory right even for employed persons while in service.

Regards,
VARGHESE MATHEW

Encashment of Leave and Employment Contracts

Encashment of leave earned by an employee is payable as a part of the contract under which the employee is working. Since there is no contract of employment between the parties, there is no case for payment of leave salary. You may pay some ex-gratia, but don't call it leave salary.

Thanks.

Dear all,

Here, the Standing Orders Act does not come into the picture. Please refer to the Factories Act and clarify the Act's position to them. Whether they have been given an employment order or not is immaterial. You have engaged them in the job for more than 2 years. Progressively, all labor Acts will be applicable to them.

Best wishes,
Regards

I am confused. You are paying a monthly amount to 2200 villagers who are not working. It's you. So let's not call it salary or wages. You say they are on strike. How can they be on strike when they are not working? Even if they were entitled to leave (which they are not since they are not working), they are not coming to work, so they're on leave all the time. Where would be the question of encashment of leave? Unfortunately, people get greedy and consider benefits as their right. I wonder if they considered that the company may simply stop paying the money altogether.

As others said, this can take an ugly turn, with physical violence against company staff and managers. You may need to take the help of the local government officers like the district magistrate and the panchayat chiefs to resolve this. Showing the letter of the law to these villagers is not likely to have an effect.

In this case, no Act will apply. These individuals are not entitled to Leave Encashment since they are not on the rolls of the company. Members rightly have concerns about the possibility of violence from the villagers once the ex-gratia payments are stopped by the company. It would be wise to have consultations with the Labour Department as well as the local administration, involving the village panchayats to sort out an amicable solution to the issue and proceed with business in that area. Also, seize this opportunity to draw up an explicit agreement with all the parties related to the issue for future reference.

Regards,
R K SINGH

Clarification on Leave Encashment for Villagers

As mentioned by you, not all the villagers are working for you. So, it means that there is a certain number of villagers who are working for you. Is the matter of leave encashment pertaining to the villagers who are working for you or through the contractor?

Secondly, there must be some written understanding reached between the company and the villagers based on which the company is paying out such huge amounts in CSR activities month on month.

I request you to give a clearer picture to the fellow members so they would be able to give their opinion on the same.

Regards,
Preetam Deshpande

Thanks to all seniors and fellow members for your valuable feedback.

Clarification on the Issue

The construction of the plant started 4 years ago. There are no written commitments or agreements for this money distribution. While signing the MOU, the company agreed to provide job facilities only to land losers (numbering 800) by giving them training according to their skills, but only after the operation starts. Our company is distributing this money for the sake of smooth workflow and includes it as a CSR activity. The villagers sometimes demand to be engaged in some work, but as our plant is currently in the construction phase and there are no skilled people in the villages, we haven't been able to engage all of them. However, around 150 villagers are working as drivers and helpers in our equipment division. The amounts we are paying are more than the government-prescribed rates, and we are maintaining wage sheets, deducting PF, and have paid bonuses twice and ex-gratia once. The plant is located in a very sensitive area, and the people here are more aggressive when it comes to money. We have faced many strikes in these 4 years of work. Now they are demanding leave encashment along with some other demands.

Legal Status of Workers and Leave Management

If you are maintaining wage registers for them, then they are employees in the legal sense. Technically, then they are on duty. You should have recorded their off days and asked people to take leave. I think you need to seek the help of the labor officer or the district magistrate to work this through. It's not a case of a requirement of law but a strategic decision with severe IR implications. I hope your drivers have been getting their paid leaves, etc.

Understanding the Case of Leave Encashment

As I understand the case, these 2200 people are not working at the factory. Therefore, the payment is not considered a wage. Legally, there is no recommendation for leave encashment. According to the law, every employee must be sent on leave; it is compulsory. Since the people are not working, how can they demand earned leave?

In this situation, it would be better to seek help from the local administration and, if possible, resolve the issue through their community leaders. If it is not resolved, then they can demand other benefits like personal loans, provident fund, gratuity, etc.

Regards