Leave Encashment Dilemma: Do I Get Paid for Unused Leave if I Quit or Am Fired?

Dear All,

I am working as a Manager in a Pharma Company based in Kolkata. I want to know:
a) If I resign, am I entitled to Leave Encashment?
b) If the company terminates me, am I entitled to Leave Encashment as well?

Kindly guide.

Regards,
Anonymous 2015

Dear Anonymous,

What is your company's policy on this matter? Please review the company policy as it will provide the answer to your question.

Regards,
Ashutosh Thakre

First of all, you have to make sure what your company policy says about whether you are entitled to leave encashment when you resign or retire. Is there any precedence?

As per government rules, when you resign, up to the date of resignation, whatever leave you have at your credit, you may claim. However, gratuity will not be paid when you resign. Termination is a complication for the company; there must be legal formalities to be followed. If your termination is due to your fault and it is proven, then you may not receive anything.

If your company is a factory, as per the Factory Act, you are entitled to encashment of annual leaves upon resignation or termination. If it is a commercial establishment, it is governed by the Shop and Commercial Est Act of West Bengal. Otherwise, it goes by the policy of the company.

If your company has more than ten persons working and you have completed five years of service, you are eligible for gratuity. What was stated above by Latha is not correct.

Types of Leave in Corporations

Normally, corporations have three types of leave, namely Casual Leave, Sick Leave, and Earned Leave (Annual Leave). Assume that you have the following leave entitlement in your company.

(a) Casual Leave (CL) is 12 days per annum (unavailed leave at the end of the year will lapse - accumulation or carry forward is not typically allowed).

(b) Sick Leave is 12 days per annum (accumulation/carry forward is allowed in some companies - for instance, with an accumulation limit of 30 days).

(c) Earned Leave is 20 days per annum (accumulation/carry forward is allowed in some companies - for example, with an accumulation limit of 60 days).

Your notice period is, say, 60 days (some companies may operate on 30 days/90 days).

Leave Encashment on Resignation

If you resign from the company, you are required to provide 60 days' notice or salary in lieu of notice, or it can be adjusted against your accrued leave - both Sick Leave and Earned Leave. Any remaining leave should be paid out by the company. If you do not have sufficient leave, you will need to pay for the balance days.

Leave Encashment on Termination

In the event of termination by the company, they must give you 60 days' notice or salary in lieu of notice. Additionally, they are obligated to cash out all your leave (including unavailed Casual Leave) available in your account and remit the amount to you.

Gratuity Regulations

Gratuity is subject to different regulations, and as per the Act, if you have completed five years of service, the company must provide the gratuity amount separately, without making any deductions.

I hope this clarifies your query.

Regards,
A B Srinivasan

You are entitled to leave encashment for the leave credit in your leave records, whether you resign or are terminated. Please refer to the leave policy and termination clause of your company to have a detailed understanding.