Understanding Leave Encashment Entitlement and Policy: Insights and Guidance

Dear all,

I have been newly appointed as an HR Executive in one of the MNCs, and unfortunately, there is no one to guide me on this. That's why I look forward to the members of CiteHR to help in this regard. I need advice on the Leave Encashment process. It's a lengthy one, so please bear with me. :)

Before I position my question, here's a little background that will help you guys help me.

As per my company's leave policy, there are a total of 27 General Leaves in a calendar year (Jan to Dec). There is no bifurcation of CL, SL, or PL as in other companies. All 27 of them are termed as General Leaves. Fifteen are mandatory to consume, and the remaining 12 can be carried forward. The leaves get accumulated every month for an employee to be able to consume. For example, if an employee has worked for 6 months, he is entitled to 13.5 GLs.

The probation period is for 6 months, and apparently, no paid leaves are allowed during this period. However, the employee will keep earning the leaves at the rate of 2.25 Leaves per month in his Leave Kitty, which he can consume after 6 months.

So here's the situation:

Employee: XYZ

DOJ: 01-May-2013

DOR: 10th-Jul-2014

I have a confusion regarding the leaves to be carried forward from FY2013 to FY2014 as the opening balance.

As per the leave policy, since he has worked for 8 months, he is entitled to 2.25*8 = 18 Leaves for 2013. However, while carrying forward to the next year, we'll have to deduct the mandatory leaves on a prorata basis too, which is 1.25*8 = 10 Leaves. But since for the first 6 months, he was on a probation period and could not avail any of the GLs, would it be fair to deduct 10 leaves while carrying forward to the next year as the opening balance?

The situation will be worse if he had joined on 01-Jul-14. Working for 6 months, he earned 13.5 leaves but couldn't consume a single one before the carry-forward takes place.

The FnF of this employee is pending for long, just due to a lack of information on the same.

A prompt answer would be highly appreciated. Really. Please suggest.

Best Regards,

HR Executive

Dear you have posted a very confused question.

First of all, if your organization is covered under the Factories Act 1948, then you have to provide ELs according to Section 79 of the Factories Act. You have to define the categories of leaves like EL, SL, and CL. ELs are carried forward. Please change your leave policy according to the applicable act in your state.

Regards,

Dinesh Kumar

Thank you for the prompt response, Dinesh. I have yet to confirm if our company is covered under the Factories Act 1948.

However, the issue at hand needs to be resolved based on our current company policy.

I'll try to rephrase the issue, and would highly appreciate prompt responses since the FnF for this employee is pending for a long time, and I'd like to resolve it as soon as possible.

Confusion: Pertaining to how many leaves will be carried forward from 2013 to 2014 as an opening balance. The employee has resigned, and we need to calculate the Leave Encashment for his FnF settlement.

DOJ: 01-Jun-2013

DOR: 16-Aug-2014

Total Leaves: 27 General Leaves

Mandatory Leaves: 15 General Leaves

According to the Leave Policy, if an employee exits in the middle of the year, the mandatory leaves will be deducted from the earned leave, and then the remaining will be encashed.

Leave data for 2013:

Earned Leaves in 2013: 15.75 (2.25*7)

Mandatory leave deduction: 8.75 (1.25*7)

15.75 - 8.75 = 7 Leaves

So, here's the question: Will only 7 Leaves be carried forward to the next year as an opening balance?

My concern is, he was on probation for the first six months (Jun-Nov), wherein he wasn't entitled to take any leaves, even though the leaves were getting accumulated in his leave kitty. So, technically he had only a month, i.e., December, to avail the 15.75 Leaves. Isn't that unfair?

How many leaves should be carried forward to the next year?

Regards

Awaiting eagerly for a response

Dear Mr. Unwritten,

First of all, you should know under which act your establishment or unit is covered. The leave entitlement is already specified in the applicable enactments, which is a statutory leave to be allowed to the employees. As per the provisions, it depends upon the number of working days the employee actually works. If we predict the employee will work for a minimum of 240 days, then he will be eligible to get a leave of 12 days at 1 day for every 20 days or a maximum of 15 days based on the number of working days. Normally, this is called Privilege leave or Earned Leave. No leave rules are specified as Casual Leave or Sick leave. Beyond this, the employer can also allow to grant the leave at his discretion for which there is no binding. I am not sure how your company is allowing 27 days. Do you have any agreement with the workers or union? What is the basis for the calculation of 27 days? Unless you specify or come out with the facts, it will be difficult to answer your query.

The leave rules are very straightforward, but you are making complications in your computation of leave. There are no fractions of days. It should be a minimum of 1 day, or if the days exceed more than 50%, then it will be 2 days, not 1 1/2 days. Read the laws, study, and then raise your query. Don't expect ready-made answers. Unless you put in your efforts to gain knowledge, you will not succeed in your career. Please ensure that whenever you are posting any query, at least give your name so that it will be interacted with in the proper way.

Adoni Suguresh

Sr. Executive (Personnel, Administration & Industrial Relations) Retired

Labour Laws Consultant

Dear Adoni Sir,

Thank you for the valuable information. Could you please shed some more light on leave entitlement as per the law? I am working in an automobile dealership that falls under the Factory Act and also the Shop and Establishment Act since we are involved in sales and services.

Currently, we are planning to provide 30 leaves in a year, with the aim to minimize the number of Privilege Leaves (PL). Our initial proposal is as follows:
- PL: 15
- Casual Leave (CL): 9
- Sick Leave (SL): 6

However, someone has suggested the following alternative arrangement:
- PL: 12
- CL: 12
- SL: 6

I would appreciate your guidance on this matter.

Regards,
Manoj

Request all to suggest on my above query.
As per the leave act of Maharashtra, what would be the best option: the first one or the second one.

Regards,
Manoj