Can We Deduct Unused Medical Leaves from Final Settlement After Resignation in India?

Hi,

I am an HR professional with a reputed company and recently encountered a new incident. Can you please help with the following:

As per the company's medical policy, we allocate 7 medical leaves to an employee's account at the beginning of the year. One of the employees resigned from the organization in February but had already taken 4 medical leaves in January. Is it possible to deduct the remaining 3.5 medical leaves from his full and final settlement as per Indian law/compliance?

Looking forward to your response.

Thanks in advance.

Understanding Leave Recovery in Final Settlement

Your credit of 7 days is for 12 months. Therefore, if an employee leaves the company in one or two months, you can recover the prorated leave during the final settlement. There is no illegality in it. But make sure that:

1. As per your state labor law, the maximum sick leave to which an employee is entitled is only 7 days.
2. The issue is not with regard to an employee coming under the category of a workman. If your establishment is a factory, then there will not be any issue because there is nothing called sick leave as per the Factories Act. If you give 7 days of sick leave, it is over and above what is statutory leave, and as such, the management has the right to frame the rules relating to it, provided there is no settlement with the workers in which the matter of sick leave is also mentioned as part of their service conditions.

Considerations for Shops and Commercial Establishments

In the case of establishments covered by the State's Shops and Commercial Establishments Act, please see what is the maximum sick leave as per the said Act. If it is 12 days, then please do not go for any recovery of leave granted. It will create more issues if the employee goes legally.

In any case, if the employee is a workman category employee, please avoid such recoveries because this will again create further complications, saying that whatever you have recovered is something that is not permitted under Section 7 of the Payment of Wages Act! Moreover, you should have a leave policy in which it should be stated that casual leave or sick leave will be granted proportionately and in emergency situations only. Sick leave for more than 3 days will be granted without considering the length of service in the calendar year, and pro-rata recovery will be made from the employees who leave the company.

I believe that an HR professional of a reputed company will not make the situation worse just to recover a couple of days' salary paid.