Are Contract Employees Really Not Entitled to Leave Encashment? Seeking Clarity!

Leave Encashment for Contract Employees

I am working in the accounts department with a company on a yearly contract basis. They provide 24 leaves per year, but due to the heavy workload, we could not take all 24 leaves.

The HR Head says that, as per the Shop & Establishment Act, the contract employee is not entitled to Leave Encashment. Can anyone help me with whether our HR is right, or are they just trying to fool us because they know that nobody from accounts will go and read the full Shop & Establishment Act for Contract Employees?

Please reply.

Regards,
Salim

Please note that since you are on contract, you have to avail yourself of the leave eligible for you within the stipulated period, or else it will lapse. This is the normal procedure. There is no need to panic.

Regards,
T.A.G. Manner Mannan

Dear Salim, I presumed that since the query has been raised from the State of Mumbai, I am replying with that in mind. Your HR head's statement is incorrect in stating that "as per the Shop & Establishment Act, the contract employee is not entitled to Leave Encashment." Your HR head is either not aware of the labor laws or is misleading you.

Understanding the Bombay Shops and Establishments Act, 1948

Section 35 of the Bombay Shops and Establishments Act, 1948, which relates to LEAVE, clearly provides in Sub-section (2) that if an employee entitled to leave is discharged by his employer before he has been allowed the leave, or if, having applied for and having been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him the amount payable in respect of the leave.

Definition of Employee under the Act

The definition under Section 2(6) of the Act clearly covers contract labor. The definition runs as follows: "Employee" means a person wholly or principally employed, whether directly or through any agency, and whether for wages or other consideration in or in connection with any establishment; and includes an apprentice but does not include a member of the employer's family.

I am sure the above legal position will help you.

Regards,
BS Kalsi

Earned Leave/Privilege Leave/Leave with Wages

The principle of Leave with Wages is laid down in Sections 78 to 81 of the Factory Act. Shop Acts from most states also provide that if a worker is entitled to leave with wages, and if he is discharged, terminated, refused leave, or dies before he has taken the entire leave to which he is entitled, or if applied for and not granted such leave, or he quits his employment, Section 79(3)(i) & (ii) state that where the worker is discharged, terminated, or quits his employment, he shall be paid before the expiry of the second working day.

Similar provisions are provided in the Delhi Shops and Establishment Act 1954 and the Bombay Shops and Establishments Act 1948, which clearly provide in Sub-section (2) that if an employee entitled to leave is discharged by his employer before he has been allowed the leave, or if, having applied for and been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him the amount payable in respect of the leave. The Punjab Shops Act 1958 Sec.14(2) also provides similar provisions.

Regards,
RL Dhingra, Advocate, Labour Law Consultant, Delhi

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Hi members,

In an AP contractual labor scenario, employees will receive full and final payment under three headings: notice pay, retrenchment pay, and leave pay, all in a specified manner.