Can I Use My Leave Balance to Cover Notice Period and Still Get Paid?

Dear Experts,

As per my contract with the employer, I have a notice period of 3 (three) months or 3 (three) months' gross salary in lieu of notice. I also have a leave sell agreement with the employer after termination.

If I want to leave the organization after 1 (one) month of submitting my resignation and have 60 (sixty) days of leave balance in my hand to compensate for the uncovered notice period of 2 (two) months, would the company pay me 2 (two) months' salary during the final settlement?

Your expert comments would help me a lot to tackle the situation. Awaiting your valued response.

Thanks,

Sandipan.

Leave Policy During Notice Period

As a rule, leave is not allowed during the notice period. However, it depends on your company policy. Speak to HR and see. As per the law, encashment of leave at the end of service is mandatory. So logically, I do not see any problem with that as such.

If your contract states 3 months' gross salary in lieu of notice, then you can indeed adjust the leave balance/unutilized leave against your notice. However, as Saswata rightly mentioned, it is advisable to speak with HR first and reach a conclusion thereafter. The seniors will be glad to advise you accordingly.

Sir, there are many firms that allow adjusting the balance of leaves against the notice period. I am aware that leave encashment is mentioned in the Shop and Establishment Act. Hence, balance leaves ought to be encashed and paid for by the employer.

However, if the person utilizes those leaves to adjust against the notice period, it means he is availing those leaves. Should, in this case as well, the company be under obligation to pay for such leaves?

I believe the leaves are to be encashed only if those are unavailed. However, in such a case, the leaves have been utilized by the person by adjusting them with the notice period.

Again, I would like to ask: In such cases (where employees are allowed to adjust leaves against the notice period) and if someone is adjusting 1 or 2 days, it is a different scenario. However, if, say, a person like this wishes to adjust 60 days' leaves against notice pay so that he can stop going to the office sooner, what should be the relieving date?

a) Last Working Day

In this case, say, for example, the person is serving notice for 1 month and came for 30 days, and the rest 60 days were adjusted with leave. Ideally, the last working day was the 30th day, and if we put this date on his relieving letter, how should things be adjusted when it comes to compliance with payment of unavailed leaves during separation?

b) End of Notice Period

The person is asking to adjust the leaves against the notice period. So ideally, he would be absent from work for those 60 days but still an employee of the old organization. So he should be relieved at the end of the 90th day (proper notice served).

But in this course, if the person absented himself from the old company and was working with a new company, he happens to be on the muster and payroll of 2 different companies at the same time. How to deal with this?

I am in a hurry, so I'm giving a short answer. (If a more detailed explanation is required, I will add to the thread later).

The law requires reimbursement/encashment of pending leave on termination/separation. It does not provide for leave to be utilized during the notice period. In fact, most companies will not allow leave to be taken during the notice period. If it is a day or two or due to some proven medical condition, they may consider it. But again, it's the company's decision. The employee can't force them to consider it.

"Sir, there are many firms that allow adjusting the balance of leaves against the notice period. I am aware that leave encashment is mentioned in the Shop and Establishment Act. Hence, balance leaves ought to be encashed and paid for by the employer. However, if the person utilizes those leaves to adjust against the notice period, it means they are availing those leaves. Should the company be under obligation to pay for such leaves in this case?

I believe the leaves are to be encashed only if they are unavailed. However, in such a case, the leaves have been utilized by the person by adjusting them with the notice period.

Again, I would like to ask: In such cases (where employees are allowed to adjust leaves against the notice period) and if someone is adjusting 1 or 2 days, it is a different scenario. However, if, say, a person wishes to adjust 60 days of leave against notice pay so that they can stop going to the office sooner, what should be the relieving date?

a) Last Working Day: In this case, say, for example, the person is serving notice for 1 month and came for 30 days, and the rest 60 days were adjusted with leave. Ideally, the last working day was the 30th day. If we put this date on their relieving letter, how should things be adjusted when it comes to compliance with the payment of unavailed leaves during separation?

b) End of Notice Period: The person is asking to adjust the leaves against the notice period. So ideally, they would be absent from work for those 60 days but still an employee of the old organization. Thus, they should be relieved at the end of the 90th day (proper notice served). But in this course, if the person absented themselves from the old company and was working with a new company, they happened to be on the muster and payroll of two different companies at the same time. How to deal with this?

Thank you, sir, for a quick and crisp response.

The reason I asked this was when I was working as a recruiter in my previous organization, I had a person who had to serve 45 days of notice while my client wanted someone with a maximum of 1 month's notice. The candidate said that he has some 20 or so leaves to his credit, and his employer would allow adjusting these accumulated leaves against the notice period (as per their policy), and he can be relieved earlier by the end of 30 days. So this actually didn't strike me then. But now I am highly confused with the questions shared in the latter part of my above post. Thanks in advance.

Adjusting Leave Against Notice Period

There are many firms that allow adjusting the balance leaves against the notice period. I am aware that leave encashment is mentioned in the Shop and Establishment Act. Hence, balance leaves should be encashed and paid for by the employer. However, if the person utilizes those leaves to adjust against the notice period, it means they are availing those leaves. Should the company still be under obligation to pay for such leaves in this case?

I believe the leaves are to be encashed only if they are unavailed. However, in such a case, the leaves have been utilized by the person by adjusting them with the notice period.

Scenario Analysis: Adjusting Leaves Against Notice Period

In cases where employees are allowed to adjust leaves against the notice period, if someone is adjusting 1 or 2 days, it is a different scenario. However, if, for example, a person wishes to adjust 60 days of leaves against notice pay to stop going to the office sooner, what should be the relieving date?

a) Last Working Day:
In this case, for example, if the person is serving a one-month notice and came for 30 days while the remaining 60 days were adjusted with leave. Ideally, the last working day was the 30th day. If we put this date on their relieving letter, how should things be adjusted regarding the payment of unavailed leaves during separation? The relieving date will be the last working day, i.e., the 30th day. Regarding the payment of unavailed leaves, it would be the encashment of leaves upon separation.

b) End of Notice Period:
If the person is asking to adjust the leaves against the notice period, they would ideally be absent from work for those 60 days but still an employee of the old organization. So, they should be relieved at the end of the 90th day (proper notice served). However, in this course, if the person absented themselves from the old company and was working with a new company, they happened to be on the muster and payroll of two different companies at the same time. How should this be dealt with?

The employee has to be relieved on the 30th day, and the remaining 60 days are considered as notice served under buyback.

As promised, I am now giving a detailed answer to your queries.

Adjusting Leave Against Notice Period

First, most companies will not allow leave during the notice period unless they simply want to get rid of the employee. The notice period is meant for searching for a replacement and handing over work and duties in a manner that the new employee can continue without a problem. So allowing leave or adjusting leave during the notice period is counterintuitive.

If you do allow the leave to be adjusted, what you are doing actually is to allow short notice. The employment terminates immediately (before his leave starts), and the rest is to be given as leave encashment with full and final settlement.

Encashment of Unavailed Leaves

Since the days he is adjusting in the notice pay is actually short notice, employment terminates at that point when he is no longer coming to work, and the leave balance at that point is encashed (therefore probably paid at basic + DA basis).

Relieving Date for Adjusted Leaves

The relieving date will be the day he stops working, not the day his leave gets over.

Compliance of Payment of Unavailed Leaves

Again, as explained, since termination is on the 30th day, the balance is leave encashment, and you will not have any problem with compliance records.

End of Notice Period and Dual Employment

Remember also that if you do not follow that, you are liable for higher gratuity, bonus, accident relief, and a whole lot of other things.

Regards.