Leave Encashment During Final Settlement: Is It Mandatory to Cash Out Remaining Days?

Dear Sir/Madam,

Greetings!

I would like to inquire about leave encashment. How many leaves can we encash at the time of issuing the full and final statement? Is it mandatory to encash the remaining leaves during the full and final settlement?

Thanks & Regards,
Mansi

Dear Mansi,

Yes, it is mandatory to pay encashment at the time Full and Final, but the number of leaves may vary as per the state. That means, for example, if the employee has a balance of 180 days, then you may encash the complete 180 days of the maximum accumulation limit prescribed by the state government. Please note, you need to adopt the same policy for all employees.

Yes, it is mandatory. You may have the option of not encashing leave while the employee is in service, unless you refuse a leave request. However, at the time of resignation, termination, or retirement, you must compulsorily encash the balance leave as per the Shop and Establishment Act of the concerned state. Also, this rule is applicable across all levels and does not differentiate between workman and supervisor.

Leave Encashment Inquiry

Thank you for your suggestion.

Dear Sir,

Thank you for giving such a good reply. I was asking because there is an employee in our company who did something wrong, leading to his termination. Usually, we encash only 45 leaves for an employee at the time of full and final settlement. The rest of the leaves are encashed yearly. However, I want to ask if we can encash more than 45 leaves, less than 45 leaves, or if not doing any encashment is also acceptable.

Is there any website where I can find documents that prove leave encashment? My boss wants proof of why we do leave encashment.