How Should We Handle Earned Leave Accumulation and Encashment in Our Company?

Earned Leave Model Development

I want to devise an Earned Leave Model which shows how many EL can be carried forward, what is the maximum limit earned leave can be carried forward to the next year, and how encashment of these leaves can be done—whether at the time of separation or by the end of the calendar year.

Let's suppose there are 18 earned leaves. What is the limit to the number of earned leaves that can accumulate after which they will lapse? Additionally, how should encashment of earned leave be handled—whether at the time of separation or at the end of the calendar year (what is the best practice to follow)?

Also, should it be considered that EL, if accumulated, can be carried forward to the next year to an extent of 90 days?

To develop an Earned Leave Model, consider the following guidelines:

1. Accumulation Limits:
- Determine a cap on the number of earned leaves that can be carried forward to the next year. For instance, a common practice is to allow accumulation up to 90 days of earned leave.
- Once the limit is reached, any excess earned leaves beyond this threshold should lapse to ensure timely utilization.

2. Encashment Guidelines:
- Establish a clear policy on encashment of earned leaves. This should outline whether encashment occurs at the time of separation or at the end of the calendar year.
- Best practices often involve allowing employees to encash a portion of their earned leaves upon separation, providing them with a financial benefit.

3. Considerations:
- Factor in legal requirements and company policies when designing the Earned Leave Model. Ensure compliance with labor laws and regulations regarding earned leave accrual, carry-over, and encashment.
- Communicate the Earned Leave Model effectively to all employees to ensure transparency and understanding of the guidelines.

By implementing these guidelines, you can create a comprehensive Earned Leave Model that balances employee benefits with organizational requirements.