Can Indian Companies Change Leave Policies Suddenly and Affect Earned Leave?

Are Indian companies allowed to change the leave policy with immediate effect, which can cause employees to lose some of the accumulated earned leave without any option to encash them? Of course, availing them can cause disruption to the day-to-day activities for the company.

Thanks

No. Leave is a condition of service. Before changing any service condition, you should take the employees into confidence. It is okay with managers and persons having supervisory roles. But it should not be the case with employees who are within the purview of the Industrial Disputes Act. As per the ID Act, section 9A, any change in service condition without giving 21 days' notice will be illegal. Moreover, any change should correspond to the relevant Acts such as the Factories Act, Shops Act, etc.

Dear Ramu,

Please confirm what changes you would like to make. What were the provisions earlier, and what provisions would you like to introduce or curtail?

The leave policy is derived from either the Factory Act or the Shops and Establishment Act of the respective state. However, there are a few companies that offer benefits beyond what is stipulated in either of these acts. We have been following a similar practice, and would you like to withdraw any of these additional benefits? Please provide more details.

Thanks,

Dinesh Divekar

Unilateral Reduction in Employee Benefits

Generally speaking, any unilateral reduction in the benefits currently enjoyed by any category of employees is unfair unless the survival of the organization is at stake.

Adverse Changes in Leave Benefits

Regarding adverse changes in leave benefits for a worker category, it will not only be unfair but can also be declared illegal if it is less than the minimum quantum provided under the FA and Shops Act, and if the change is made without giving notice of change under the ID Act.

Importance of Employee Communication

Any contemplated changes in service conditions require taking affected employees into confidence through appropriate communication and earning their acceptance. If a unilateral or high-handed approach is adopted, it is bound to cause widespread dissatisfaction, leading to employee turnover, decreased productivity, work stoppages, and generally lower morale among the employees.

Regards,
Vinayak Nagarkar
HR Consultant