Are Employees Entitled to Wages for Unused Leave if Terminated? Let's Discuss!

My name is Mahesh Purohit. I have a query about annual leave with wages. If an employee completes 240 days in the last year, they are eligible for annual leave with wages in the current year. However, if the employee is terminated or discharged by the employer before utilizing their annual leave days in the current year, are they entitled to receive wages for those unused days?

An employee who is discharged or dismissed from services, for whatever reason, is entitled to wages in lieu of the quantum of leave to which they were entitled immediately before their discharge or dismissal. This leave includes the leave to which they are entitled for their work in the current year.

First, you need to specify which law your organization falls under. What KK explained is provided for in the Factory Act (encashing pending leave at termination of employment). Some of the Shop and Establishment Acts have similar provisions, but you need to check if the same applies to your unit.

Kindly refer to Section 79, Subsection 3 of the Factory Act, which states the applicability. As such, he is entitled to wages in lieu of the quantum of leave to which he was entitled immediately before his dismissal.

Thanks.

Mr. Pradeep is correct. For the sake of argument, let's assume if an employee leaves on his/her own, will you pay Annual Leave? The question does not arise similarly when terminated or discharged. But it comes under the IT Act; please recover TDS.

Regards,
V. Murali

I agree with Saswatabanerjee. There are different provisions in different Acts. Besides the Factories Act mentioned, in the Mines Act of 1956, the maximum limit allowed to be encashed is 30 days only in case of separation for reasons other than superannuation. However, I would like to add that if an employee has been terminated or dismissed on the grounds of moral turpitude, then they are not entitled to leave wages for the remaining annual leave at their credit.

Regards,
AK Jain

Provisions contained in the Factories Act, Mines Act, and Plantation Labour Act are similar except for the amount of leave earned and the qualification period for a single day of leave with wages. Of course, if your organization is covered under the Shops and Commercial Act, the situation may be different. You may decide on the issue accordingly.

Regards,
S.K. Johri

My response to the query was very specific. Unfortunately, it was deleted by the moderators/administrators. My response was appreciated even by our senior member, Shri. Saswata Ji. Whether it is a factory, mine, shop, or commercial establishment, the concept of earned leave remains the same. The question raised by the querist is related to this concept, in my opinion.

Once an employee completes 240 days of service, he or she becomes eligible for Earned Leave (EL) or Annual Leave payment, regardless of whether they are terminated, discharged, or resigned. For further clarification, please refer to the Industrial Disputes Act regarding terminal conditions.

Regards,
V. Murali