Compensatory Offs Encashment: Should We Include DA or Just Basic Pay?

Kindly clarify whether for the calculation of compensatory offs encashment, Basic + DA is to be considered or only Basic.

Thank you.

Dear Sasubura,

Please confirm, what does compensatory off actually mean? Are you referring to a paid holiday, a weekly off, or extra hours worked as compensation?

Kindly provide more details in your question, which will enable us to respond to your query effectively.

Thank you.

Dear Sasubura,

It can be either of them only. Either the employee has done overtime and you are seeking calculation of payment, or if they are taking compensatory time off, you are seeking the mode of adjustment.

Compensatory time off shall be deemed to be a regular working day for such an employee and needs to be paid in full, as it is a paid leave.

As per law compensatory off can not be encashed any more than weekly offs can be encashed.
It's not allowed so I suggest you do not do it

Dear colleague,

The law provides for giving one day off in a week for working 48 hours. If anybody works on the weekly off day, it is to be substituted with another day, and full wages are to be paid. If anybody works on a paid holiday, they are either paid double the wages or single wages with a substituted paid holiday. There is no compensatory off for having worked overtime, and OT hours are to be paid at double the normal wage rate.

Regards,
Vinayak Nagarkar
HR Consultant

Compensatory Offs and the Factories Act

Although there is no provision for Compensatory Off in our statutes, there is only a provision for a compensatory holiday, as mentioned in Section 53 of the Factories Act 1948. However, in the manufacturing sector, there is a widespread practice of Compensatory Off as a holiday earned for extra work, whether it be in excess of 48 hours per week or for working on a weekly off day. It is risking the life and limb of a workman, and the ideal condition would be complying with the compensatory holiday condition as per the Factories Act (i.e., to be availed within 1+2 months).

High Court Judgment on Compensatory Offs

In fact, there is a high court judgment which states that a workman cannot have both overtime payment and a compensatory holiday for extra working. But the pertinent aspect is that there cannot be encashment of compensatory off; there is no law providing for it, and on top of it all, it deprives a workman of his need for bodily rest and rejuvenation, which is very badly needed. Such a practice would tempt a workman to sacrifice his need for rest for certain extra work. As conscientious HR practitioners, we should not encourage such practices.

Understanding Compensatory Offs

The compensatory off is essentially a way to compensate for work done by an employee on their off day. When employees are called to work in an emergency or exigency condition on a declared holiday, the holiday working is compensated by allowing a leave on another day, possibly with cash compensation as per the statute of that state. This is not uniform for all, as different organizations have different leave rules and certified standing orders. These standing orders and leave rules are framed by the organization and may include provisions under Acts and rules such as the Factories Act, Mines Act, Shops and Commercial Establishment Act, and National and Festival Act.

Distinction Between Compensatory Off and Overtime

Overtime does not fall within the ambit of compensatory leave provisions; rather, it involves paying double the rate and will reflect on the payment of that month. Leave calculation is done at the end of the calendar year based on the attendance recorded by the employee as per the ratio set by the organization. It is possible to add or deduct surplus leave or advance leave taken during the year. It is up to you to decide how to proceed in the matter.