Salary Deduction Dilemma: Should We Cut Pay if Leave Balance Exists?

I want to know, as per labor law and the Shop and Establishment Act, do we deduct the employee's salary if they have leave balance?

Kindly tell me in which act it is written that it is illegal to deduct the salary if leave balance is there.

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Kindly inform me in which act it is stipulated that deducting the salary is unlawful when there is a remaining leave balance.

Understanding Leave in Employment Context

The term "leave" literally means permission, and in an employment context, it denotes a leave of absence from duty. It implies that prior permission, sanction, or approval from the employer for availing leave is essential, except in the case of leave on medical grounds duly recommended by a registered medical practitioner. In short, leave is an authorized absence from duty.

Availing leave by an employee without intimation or prior sanction, even if a sufficient credit balance is available in their leave account, constitutes unauthorized absence. For such instances, deductions from wages can be made under section 7(2)(b) of the Payment of Wages Act, 1936.

Regards,
Asiya Bano

Leave can be refused. It is not a matter of right. Deduction can be effected for unauthorized absence. But please check concerned would have informed leave either to the Supervisor or would have reached him through his colleague. It is not illegal to deduct salary.

If the concerned HOD has been informed, even through phone or SMS, or if the HOD has approved the leave and the employee has leave in credit, it cannot be treated as LWOP (Leave Without Pay). Deduction will be unfair and create problems for HR.

The facts and circumstances are not clear, warranting the deduction of leave when leave is available in credit. Please reveal the facts so that members can offer suggestions to solve it.

Rules and Formats for Leave Management

I can provide rules and formats for short and long leave, extra work - compensatory off, regular compensatory off application, PL-encashment form, LWOP, maternity benefits rules and forms of notice, claim for maternity benefits, etc.

Most employees try to save leave, and they must save since that is what they will get when they quit the company. When an employee suddenly goes due to urgency and returns after 3-4 days, how do we adjust without saving his W/O?

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Regards, C.Neyimkhan

HR Consultant, Ex-AGM-HR & Admin. Ex-Member, NIPM, Ex-Trainee-Member, IIM Bangalore. Languages Known: Tamil, Kannada, Telugu, Malayalam, English, and Hindi.

If the employee has abstained without intimation and/or approval of leave, or the leave sought for has not been approved and non-approval intimated to the person, the employer has the right to deduct the salary for the absent days.

bgramesh, Hosur

Yes. You can deduct if the leave is unapproved. In any case, if the leave is not approved by the immediate supervisor or HR, you can treat it as loss of pay.

Dear Asiya Bano, your question, I think, is related to the cases of absence without taking leave and then asking the Time Office to adjust the leave balance.

Firstly, let me clarify that "cutting the days of absence" is not a "deduction" from salary. Deduction has a specific meaning under the PW Act and MW Act. We must call it "days of attendance are less," and salary paid is directly proportional to days of attendance. HR people should not confuse these terms.

Leave is the right of an employee, but availing leave is not a right of an employee. So, one cannot claim the right to remain absent and then ask to adjust the leave balance.

The model standing orders do give us guidance regarding making leave applications and the sanctioning policy. The department's priority prevails in leave sanctioning.

I hope the matter is clear.

I am really not yet clear because I want to know if a person has any leave remaining, i.e., 31 leaves, but the employer is deducting the salary for the leave taken in the month. Is it legally authorized or not? If not, do we have any legal laws for this in labor law as we are registered under shop and establishment.

Let me presume from your last post that the employee avails leave after applying and receiving approval from the employer, yet the employer still deducts salary for the leave taken in the respective month while there is sufficient credit in the employee's individual leave account. Such an act by the employer is certainly illegal.

However, in my enforcement experience, I have noticed a practice being followed in some establishments where both the employer and the employees are active partners. Whatever leave is due for the entire year, such as Casual Leave (CL), Privilege Leave (PL), and Sick Leave (SL), is surrendered for cash benefits once at the end of the year. If any leave is taken subsequently, a proportionate deduction is made from the salary. This is not a legally correct practice as it defeats the very purpose of leave benefits provided for in any particular statute, even though arguments of payment of equal cash benefit and voluntary acceptance by the concerned employees are tactfully advanced.

Leave provisions under various heads are incorporated in every establishment-oriented Labour Legislation only after critically evaluating the nature of work involved. This is for the purposes of offering sufficient leisure from the monotony of the work environment and enabling employees to meet unforeseen necessities for leave of absence and discharge their social commitments as well. Such a practice amounts to contracting-out, which is explicitly or impliedly prohibited in any Labour Law.

In any case, you can make a complaint personally or through your Trade Union to the enforcement authorities or the State Labour Commissioner.