How Do I Calculate and Encash Previous Year PLs for an Employee Leaving Soon?

We are having an employee relieved from the company in August 2014. His remaining PLs since April 2014 are 2, and previous year balanced PLs are 12. Can anyone tell me if there is any specific rule regarding the calculation of previous year PLs? How should I calculate his PLs to encash for him? Also, help me to understand the act regarding employees' leave encashment.

Understanding Leave Encashment

There is no statutory law for leave encashment. You can encash by 100% of the gross salary or 100% of the basic salary as per company policies.

Yes, I did the same, but my seniors have asked me to check if there is any rule regarding PL calculation. Hence, I put a query here.

If you want to ask how to calculate EL/PL, the answer could be as follows:

1. For every 20 days of working, 1 EL will be generated, which can accumulate up to 30. However, an amendment made in 2002 allows it to accumulate up to 45.
2. Only employees who serve 240 days (including holidays and weekends) or more in a factory during the calendar year will be eligible for EL.

Regards,
Anurag

Leave Policy and Encashment Guidelines

Please state your Leave Policy to provide an appropriate view. Normally, PL (Paid Leave) is carried forward to the coming years to the extent decided by the management in their policy. Over and above the limit, it is lapsed. So, in this case, if any PL balance is available in the account of any employee, it has to be encashed at the time of relieving the employee.

Regards,

First, you need to clarify whether you are under the Factory Act or the Shop and Establishment Act (and in which state it applies). The answer will depend on this.

Do you have a leave policy in your organization? If yes, what does it say about:

1. Accumulation of PL
2. Encashment of unearned PL

You need to be guided by that. If there is no leave policy, it is fair to allow the staff to encash the un-availed leave. The next immediate step is to design a clear leave policy.

Thanks

Normally, the PL or EL is calculated on a calendar year basis under all enactments and not on a financial year basis. To be eligible for leave, one must complete 240 working days from January to December. If an employee joins in the middle of the calendar year, they should complete two-thirds of the attendance. Employees will be eligible for 1 day of PL for every 20 days worked.

When an employee leaves, they can check their leave records and receive payment for the remaining PL along with this year's leave entitlement. Calculate 1 day for every 20 working days from January until the day of their departure. The leave salary should be included in the final settlement as per the salary structure.

Regards,
Adoni Suguresh
Sr. Executive (Pers, Admin & Ind. Rels)
Rtd Labour Laws Consultant

Whatever you are stating is for the Factory Act. The post was by someone covered by the Bombay Shop and Establishment Act.

To CIM Operations,

Yes, we do have a clear leave policy. It states that we must encash the PL for the employee. I just wanted to know if there is any specific law regarding PL/EL encashment or not?

Thank you, everyone, for your participation and for sharing your knowledge. Thank you very much.

As such, there are no separate or specific Acts, Rules, or Regulations concerning leave encashment or PL. The establishments covered under applicable enactments should adhere to the respective Acts and Rules. If it falls under Shops and Establishments, please refer to the respective acts, and if it is a factory, refer to the Factory Act. The eligibility criteria for PL or EL in all acts are the same, as there is no deviation in the procedures regarding statutory leaves.

Regards,
Adoni Suguresh
Sr. Executive (Personnel, Administration & Industrial Relations)
Retired Labour Laws Consultant