How Do You Calculate Pro-Rated Leave for New Employees in a Small Company?

I am working as HR in a Pvt Ltd Company, and we are in the process of establishing an HR system in our company. This is a small company with 20+ headcounts. I want to know the leaves permissible in a year. If an employee joins in the midst of the year, how do we calculate the pro-rated number of leaves for the rest of the year?

Please help me with this.

Thanks,
Kalpana

As per the Shops and Establishment Act:

1. Employees are entitled to 21 days of leave if they have worked for a minimum of 240 days in the year.

2. If the employee is newly appointed, they are entitled to no more than 5 days of leave for every 60 days of work they render.

3. The payment for such days would be related to the average pay the person received in the past 3 months, excluding the overtime allowance.

However, please note that this is the minimum requirement prescribed. A company can provide more than 21 days, depending on its functions. It is up to the company's management to decide the upper limit of the leaves per year if the minimum is set at 21 days.

Many companies have a policy that during the probation period (which is typically 3-6 months), there won't be any paid leaves. Thus, depending on your company's policy, either upon joining or confirmation, the candidate is entitled to leaves on a pro-rata basis, depending on the maximum leaves allowed by the company.

Hope this clears your doubt.

Regards

The number of leaves varies from state to state. It will also depend on which Act your company is registered under—Shops & Establishment Act or Factory Act. The leaves may be for a calendar year (Jan to Dec) or financial year (Apr - Mar). Let's take the calendar year for calculation.

Assume 21 Earned Leaves and 12 Casual Leaves in a year.

If a person joins on 01 Jan, the entitlement is 21 EL and 12 CL.

If one joins on 15 Mar - 21/12*9.5 = 16.625. Since the fraction is more than 0.5, it is rounded off to the higher figure, making it 17. However, this may be done only at the time of making the Full & Final settlement and leaving the EL as 16.5 for the year, as per the HR policy.

The same calculation applies for CL.

For EL, companies usually do not grant EL until the services of an employee are confirmed. However, for calculation purposes, EL starts from the day the employee joins and keeps accumulating.

It appears that you are based in Kerala. If that is so, the entitlement is as follows:

- EL: 12 after 12 months of continuous service
- Sick Leave: 12
- CL: 12
- Special CL as applicable in the Act.

EL may be modified to be 12 in a year after services are confirmed on a pro-rata basis.

Please feel free to ask for any clarification.

Hi Mr. Varghese, you're right. My company is in Kerala. If so, are the above-mentioned criteria still applicable for our company, right?

If yours is a commercial establishment, what Mr. Ajay has posted is correct. In addition, employees who undergo sterilization are entitled to special leave with wages for a period not exceeding:

- 6 days for males
- 14 days for females

This is effective from the date of sterilization. If yours is a factory, leave will be governed by the Factories Act. Leave can be allowed on a pro-rata basis at 1 day per month.

Regards,
Varghese Mathew