Navigating Leave Calculations Under the Factories Act 1948: Seeking Clarity on Common Confusions

Hi All, First of all, I am sorry to ask such a common and vastly discussed topic. No doubt, I have read the theoretical part of the Factories Act 1948, but now, as I am working (as a Fresher) in a manufacturing sector, it has become quite confusing for me to apply the learned knowledge practically.

Understanding the Factories Act 1948

According to the Factories Act 1948, "Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of:

- if an adult, one day for every twenty days of work performed by him during the previous calendar year;
- if a child, one day for every fifteen days of work performed by him during the previous calendar year."

Questions on Leave Calculation

1) Here, are the 240 days to be counted from the beginning of the calendar year? i.e., from January to December? If a worker has joined the company in October, then how do we count and calculate the 240 days? If he/she has joined in October, then it would be said that he has worked for only 90 days in the previous year. Then how do we calculate Earned Leaves for him in the subsequent year?

2) Is there any minimum number of Earned Leaves given for which an employee is eligible after meeting the criteria of working for a minimum of 240 days in the previous year?

3) My last question is, do we need to consider the 20 days rule only after the employee completes the 240 days criteria, or is the 20 days rule a part of (inclusive) that 240 days period?

I know what I have asked above might be confusing, but that is because I am confused.

Dear All, please advise me if an employee works for 20 days in a month, and a company provides 2.5 EL in a month, then how many leaves can he avail in that month? Is there any specified formula or law?

Regards,
ANURAG BHARGAV

Understanding Calendar Year and Earned Leave Calculation

Calendar year means starting from 1st January to 31st December. If employees join in October, then calculations are to be made on a pro-rata basis. The 240 days of working in a year are to ensure regularity in employment, which includes authorized leave, etc. Earned leave is to be calculated by dividing working days by 20. Working days include working days, weekly offs, national and festival holidays, and casual leave, but not earned leave.

Thanks,

V K Gupta

Dear Gupta VK,

Calculation of Earned Leave (EL)

EL is to be calculated by dividing working days by 20. Working days include working days, weekly off, National & Festival Holidays, and casual leave, but not earned leave.

Clarification on Working Days

If I am not mistaken, the meaning of working days here refers to only actual worked days. That is, for the calculation of Earned Leave, we consider only the actual working days (number of days work performed).

Thank you.

Inquiry on Earned Leave Computation Under the Factory Act, 1948

I am writing to inquire about computing Earned Leave based on the Factory Act, 1948. Maternity Leave and Lay Off will be considered for computing the 240-day limitation.

Annual Leave with Wages

79. Annual leave with wages. (1) Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed, during the subsequent calendar year, leave with wages for a number of days calculated at the rate of:

(i) If an adult, one day for every twenty days of work performed by him during the previous calendar year;

(ii) If a child, one day for every fifteen days of work performed by him during the previous calendar year.

Explanation 1: For the purpose of this sub-section:

(a) Any days of lay off, by agreement or contract, or as permissible under the standing orders;

(b) In the case of a female worker, maternity leave for any number of days not exceeding twelve weeks; and

(c) The leave earned in the year prior to that in which the leave is enjoyed;

shall be deemed to be days on which the worker has worked in a factory for the purpose of computation of the period of 240 days or more, but he shall not earn leave for these days.

Thanks & Regards,

Mohan

Many learned readers have given you many valid suggestions. I would like to share mine below, which might be helpful through my personal experience and work.

Condition of 240 Days

1. The condition of 240 days is applicable for employees who are on the roll from January 1st to December 31st in a calendar year. For employees who join in between, their leave is calculated on a pro-rata basis, ensuring their attendance is not less than 2/3 of the available working days after joining the organization. If their attendance falls short of 2/3, they are not entitled to any Earned Leave (EL) for that year. It's important to note that the leave earned for the previous year is credited on January 1st of the next year.

2. When considering the 240 days, if the attendance of an employee, who is on the roll for the whole calendar year, falls short of 240 days, the authorized leave (EL, Sick/Medical Leave, Paid National Holidays, Casual Leave, Maternity Leave for female employees, special injury leave for injuries arising during employment, etc.) is added to the actual attendance. If the total reaches 240 or above, the employee is entitled to EL for that year, but the leave will be calculated based on actual physical attendance only. For example, if Actual Attendance = 192, Authorized Leave = 56, Total = 248, the employee, though falling short of 240 days, qualifies for EL calculations on 192 days. He will be entitled to 192/20 = 9.6 or 10 days (rounded off) EL.

3. Weekly offs, for which the employee has not worked, will not be taken into account.

Hope this will help.

Best wishes.

Regards,
AK Jain
HR Personnel, NCL/CIL

Strictly going by the Factories Act, anyone joining in October will not be eligible for paid leave in the next calendar year because they will not have completed 240 days in the calendar year. Most companies give proportionate leave to be fair, but it is not required by law. In counting working days, days of earned leave should be included as they are a part of the working days for the employee. The rest of your points are completely in line with my understanding of the act.

I do not agree with your following views: "Strictly going as per the Factories Act, anyone joining in October will not be eligible for paid leave in the next calendar year because he will not have completed 240 days in the calendar year. Most companies give proportionate leave to be fair, but it is not required by law."

Clarification on Section 79(2) of the Factory Act

Section 79(2) of the Factory Act says that if a person joins other than on 1st Jan, then he is entitled to leave provided his working during the remainder of the calendar year is 2/3 days during that period. Similarly, if an employee leaves during the calendar year, he is entitled to earned leave as per his working up to his exit date. You may refer to Section 79(2) & 79(3) in this regard, reproduced below:

"(2) A worker whose service commences otherwise than on the first day of January shall be entitled to leave with wages at the rate laid in clause (i) or, as the case may be, clause (ii) of subsection (1) if he has worked for two-thirds of the total number of days in the remainder of the calendar year.

(3) If a worker is discharged or dismissed from service, quits his employment, is superannuated, or dies while in service during the course of the calendar year, he or his heir or nominee shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before the discharge, dismissal, quitting of employment, superannuation, or death calculated at the rates specified in subsection (1), even if he had not worked for the entire period specified in subsection (1) or subsection (2) making him eligible to avail of such leave. Such payment shall be made:

- where the worker is discharged, dismissed, or quits employment, before the expiry of the second working day from the date of such discharge, dismissal, or quitting; and

- where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuation or death."

I hope I am able to clarify for you.

Thanks,

Regards, V K Gupta