Downsizing Dilemma: Are Employers Required to Pay for Unused Leaves?

Dear All,

I have been working with an MNC for the past 13 years, and now the company is downsizing due to unfavorable market conditions. I would like to understand if the employer has to encash all un-availed medical, annual, and casual leaves in case of downsizing or retrenchment. Your expert comments in this regard would be highly appreciated.

Thanks

I think that the questioner requires an answer only for the compensation in lieu of unavailed leave at the credit of the employees likely to be retrenched due to downsizing of the establishment.

Types of Leave

There are different kinds of leave such as casual leave, sick leave or medical leave, annual leave with wages, earned leave, or privilege leave, depending upon the type of the establishment and the nature of the work of the employees. Not all kinds of leave can be carried forward over a period of years and accumulated to a certain extent in the leave account of the employees.

Some leaves like casual leave (C.L.) and sick leave, if unavailed, get lapsed at the end of the calendar year. Therefore, only those leaves which can be accumulated over the years as per the employment law applicable to the establishment or as per the contract of employment need to be considered for encashment on the termination of employment, such as resignation, retirement, retrenchment, etc.

If the management has the magnanimity to permit encashment of all kinds of unavailed leave at the time of retrenchment, well, there is no legal bar other than from the income tax perspective!