Is Privilege Leave Encashment Required During Probation Under Delhi Law? Seeking Clarity

Dear all, please update me on whether an employee is entitled to the encashment of Privilege Leave as per the Delhi Shops & Establishment Act during the probation period. Based on my understanding, an employee is entitled to PL if they have served for a period exceeding 4 months, regardless of whether they are on probation or not. Therefore, upon the employee leaving the organization, the organization must encash their PL in the full and final settlement. Kindly confirm if I am correct or incorrect. Please also provide any legal case findings or acts that support this.

Awaiting earnest inputs and knowledge enrichment from fellow members and experts.

Thanks and Regards,
C.M. Mohla

Encashment of Privilege Leave

Normally, encashment is permitted at the time of discharge or when the employee leaves after resigning from the company. However, if there has been an accumulated balance of PL beyond which no further accumulation is permitted, any addition to the PL shall be encashed. In no circumstance can an employee demand encashment of PL within a four or six-month period.

It is true that under the Delhi Act, there is a provision that an employee who has served for 4 months shall get 5 days. However, this does not mean that immediately after getting the leaves credited, he can encash the same.

Regards, Madhu.T.K

Dear Sir,

Thank you for your interest and earnest response. However, I am still unclear about whether an employee can demand full encashment of earned leave (EL) after resigning, especially when they are under a probationary period during which they are not required to serve a notice period. Is there any applicable law or case that supports this scenario in court?

I look forward to receiving a kind update.

Warm Regards,

C.M. Mohla

The relief that a person is entitled to is generally credited to his account at the end of the year. For a person who is in probation, I assume he has not completed the year. In that case, he will not be entitled to the leave or its encashment.

Probation Period and Leave Encashment

The employer decides the probation period. It is stated that for every new employee, there will be a probation period. The length of this period depends on the demand for and supply of labor. Therefore, we set a shorter period for a person with limited supply, whose employment is crucial based on the company's needs, and a longer probation period for a clerk or laborer who can be easily recruited. This implies that there is no legal sanctity to the term probation, although some courts have suggested that termination during the probation period is not challengeable. However, there are clear instructions that if a probationer, whose services are terminated after at least one year of employment, must be compensated as per section 25F of the ID Act. In such cases, the probationer and confirmed employee are considered the same.

Leave Encashment During Probation

Regarding leave encashment, the law dictates that an employee should receive encashment upon leaving the organization. The law does not specify whether the employee needs to be confirmed. This means that if you have accrued paid leave by working for a certain period, you can encash it upon leaving, even if you are not confirmed. Therefore, if you have a probationer who has worked with you for the last 12 months and earned 15 days of paid leave, he should receive that paid leave when he leaves. Denying him paid leave solely on the basis of still being under probation is not justified.

Regards, Madhu.T.K

Dear Sir,

This means that if an employee, whether confirmed or under probation, is entitled to encashment of Privilege leave at the time of his full and final settlement in accordance with his employment period over and above four months. Please correct me if I am wrong?

Thanks and Regards,
C.M. Mohla

The provision of granting leave after four months of service is not available in all State Acts, but it is included in the Delhi Shops and Commercial Establishments Act. If you refer to subsection 2 of section 22, which discusses the encashment or payment of wages for unutilized leave at the time of an employee's discharge, you will find that this is available only to those who leave after 12 months of continuous service. Let's go through section 22 for a better understanding.

Section 22 - Leave

(1) Every person employed in an establishment shall be entitled to:

(a) After every twelve months of continuous employment, privilege leave for a total period of not less than fifteen days;

(b) In every year, sickness or casual leave for a total period of not less than twelve days;

Provided that:

(i) An employee who has completed a period of four months in continuous employment shall be entitled to not less than five days of privilege leave for every such completed period; and

(ii) An employee who has completed a period of one month in continuous employment shall be entitled to not less than one day's casual leave for every month.

Provided further that...

(2) If an employee entitled to leave under clause (a) of subsection (1) of this section is discharged by his employer before he has been allowed the leave, or if, having applied for and been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him full wages for the period of leave due to him.

Please read the above subsection, which clearly states that encashment is only open to employees described under clause (a) of subsection 1. At the same time, the matter relating to the accrual of leave for an employee serving four months is given in clause (b). Having said that, those who have worked for 12 months and thereby earned 15 days of PL would only be given wages equal to leave not availed at the time of discharge.

Hope this clarifies any doubts.

Regards, Madhu.T.K