Understanding Compensation for Leaves and Benefits When Given Short Notice by Employer

Compensation for Balanced Leaves and Short Notice Period

1. Is the employer obliged to compensate the employee for outstanding sick leaves?

2. On what basis is the employer supposed to compensate the employee for outstanding privilege leaves—basic salary or gross salary? The appointment letter states only 'pay in lieu of notice' and does not specify basic or gross. However, HR claims that it is in the manual. My question is, what is the position in law on this?

3. Is the employer obliged to compensate the employee for facilities provided to him, like a car and insurance, for the short notice period because the employer gave short notice?

Review Your Company's Leave Policy

Please go through the respective leave policy of your company.

• As per the law, the employer is not liable to pay any compensation for outstanding sick leaves.

• Please review the leave policy of your company. According to the Factories Act, there is no specific provision on whether Earned Leave (EL) should be encashed based on Basic & D.A or on a gross basis.

• The employer is not obligated to provide car or insurance facilities until the completion of the notice period if the company requests an employee to leave before the notice period ends. The employer must pay all salary components (notice pay) as compensation for the shortened notice period.

Understanding Wages Under Section 80(1) of the Factories Act

Section 80(1) of the Factories Act clearly states what constitutes 'wages' to be paid to an employee when they avail of leave or encash the same. It means gross earnings, not just basic salary plus DA (Dearness Allowance). The wording specifies total full-time earnings, including DA but excluding overtime (OT) and bonuses. Whatever is paid when an employee is on annual leave should also be paid when wages are paid in lieu of the quantum of leave.

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Regards

If your firm is not a factory, forget about the Factories Act. Read the definition of wages and other provisions of the Shops & Commercial Establishment Act of your state and follow it. Generally, there is no law stating that CL/SL should be encashed if not mentioned in the contract of appointment.

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