Is Leave Encashment Mandatory Under the Shops and Establishment Act? Seeking Clarity

Leave Encashment Under the Shops and Establishment Act

Please guide me on whether leave encashment under the Shops and Establishment Act is mandatory or a management decision. In which labor law is it mentioned?

Regards,
Sathish
HR

Leave Policy Details

CL & SL will lapse, and PL/EL can be encashed. PL/EL will be credited after completing one year of service with the same company at a rate of 1.25 days per month, totaling 15 days annually. The encashment is mandatory if an employee has a P/E leave balance, but it will be subject to the company's leave policy.

According to the company policy, employees can accumulate a maximum of 40, 48, 60, etc., PLs based solely on the organization's policy. After reaching the maximum accumulation, any excess balance will be automatically encashed if the employee leaves the organization, and the remaining balance will be settled in the Full and Final settlement.

I hope this clarifies your doubt.

Regards,
Karthik

[Phone Number Removed For Privacy Reasons]

Leave Encashment Policy

Leave encashment is mandatory only in the event of an employee's death, retirement, or upon leaving the company. Otherwise, the PL/EL will lapse automatically after reaching the limit specified by the company's Leave Policy.

Leave encashment is a non-statutory benefit. It is not compulsory. However, if your standing orders state so or if there is any agreement between management representatives and the employer, then only this is binding, i.e., leave encashment becomes mandatory.

Thank you,
Ravikiran

As per my understanding, leave encashment is a non-statutory benefit. Leave encashment is not compulsory. However, if your standing orders state so or if there is an agreement between employee representatives and the employer, then only this is binding, i.e., leave encashment becomes mandatory.

Thank you,

Ravikiran

PS: Ignore my typo error in my previous message. Attribution: https://www.citehr.com/477562-leave-...#ixzz2mHwaKwuj

Leave Encashment Under the Factory Act 1948

Leave encashment is compulsory under the "Factory Act 1948 Section 80 - Wages during leave period." During the service period, providing leave (PL or EL) is compulsory on demand of the employee if applied within the prescribed time (before 7 to 15 days as per company rule). If for any reason the company disallows their leave, the leave will be encashed or compensated. Leave encashment is not compulsory during the service period and depends on the company or firm policy. At the time of separation of an employee for any reason, it will be compulsory to pay a value equal to their balance leave (EL or PL). Encashment must be on gross salary (except for Bonus and Overtime). Any firm can encash leave on Basic Salary only if Basic Salary is deducted in the case of leave without pay (absent) condition.

Regards,
Madhusudan Mishra

As rightly quoted by a few above, it is binding on the employer if it is mentioned in their service regulations only. In nationalized banks (PSU Banks), half of the total accumulated PL will be allowed as Leave Encashment upon resignation, with a maximum of 240 days at the time of retirement or death, and a maximum of 30 days in an LFC cycle of 4 years.

Regards,
Sesha Srinivas

Non-availed EL/PL are mandatory and encashable at the time of separation from the company, for whatever reason, such as resignation, death, termination, discharge, etc. There should be no doubt about it. It is neither at the discretion of the employer nor a policy matter but legally implemented by legislations and enforceable by law, specifically the Factory Act and Shop & Establishment Act (which vary from state to state on accumulation and quantum).

However, CL/SL are not encashable; these lapse at the end of the year.

Regards