New Company Leave Policy: How Do New Employees Earn and Calculate Their Leave?

Our company is new, and employees are asking about the leave policy. What are the rules to get Earned Leave (EL) and how can it be calculated? Newly joined employees are eligible for EL.

Annual Leave Under the Factories Act (India)

The Factories Act (India) provides annual/earned leave of 12 working days for all workers who have worked at least 240 days in a year. The simple calculation is: 1 leave earned for every 20 days worked by an employee. Employees earn these leaves after 240 days of working, which makes new joiners not eligible for ELs. Thus, Sick Leaves and Casual Leaves are provided to facilitate employees before completing 240 days of working.

Leave During Probation Period

It is not a mandate, but some organizations don't allow any additional leaves (other than weekly off and holidays defined by the government) until the completion of the Probation Period, which could be for 3-6 months after the date of joining. Leaves during probation in the mentioned scenario can be Leave Without Pay.

The above-mentioned information is based on my own understanding, so please do cross-check the info before drafting any policy.

Regards

Hi Friend, the leave policy needs to be framed as per the Factory Act or Shop & Establishment Act. Both acts have defined leave provisions. Earned Leave (EL), Casual Leave (CL), and Sick Leave (SL) have to be provided as per the acts. According to the Karnataka Shop & Establishment Act, every employee who works for 20 working days is eligible for 1 EL and 1 CL/SL for a month. They can carry forward up to 30 days of CL. Encashment needs to be given once an employee leaves the organization. It is essential to maintain the required registers, such as the Leave register and Leave book.

For more clarity, I request you to kindly go through the act (Factory Act or Shop & Establishment Act) applicable to your company. Feel free to call or revert for any assistance.

Hello, it seems from your post that you need to update your staff members on the Leave Policy. Seniors have already replied to you on the applicable leaves with respect to your state. I suggest you prepare an informative circular on Leaves and put it up on your notice board or circulate it to your staff so that you do not have to deal with them individually.

Leave Policy for New Joiners

Since new joiners are not eligible for EL (Earned Leave) or PL (Privilege Leave) as well as CL and SL on probation, few companies allow them to take CL or SL as advance leave on probation. The leaves taken on probation will be deducted from their leave balance, and they will become eligible once they are confirmed. It is beneficial as employees are saved from without pay leave, and they can at least take a couple of leaves to meet urgent needs.

As an HR professional, you may initiate such a practice with the due approval of management.

Hi, I am calculating EL for the first time manually. Please let me know how we can calculate EL if an employee has used up 7 CL and 7 SL, in addition to company-given holidays (10-11 per year). How do we calculate EL in this scenario?

Calculating Earned Leave (EL)

As every 20 days of presence generate an EL, how do we determine these 20 days? Are Sundays, holidays, and the employee's own leaves included in these 20 days?

Understanding the 240-Day Requirement

I got confused after reading some responses mentioning that 240 days are needed to calculate EL. How is this 240-day calculation determined and fixed? Is there a specific formula for this?

Please explain in detail.

Maybe it is too late to reply to this thread, and you must have already received your answer. Just for clarification, based on what I have observed in industries:

1. Earned leave is mandatory, but the number of EL days varies from company to company.
2. A company may provide 18 EL days (if we consider the formula of 1 leave day after 20 working days). These working days do NOT include unauthorized absences, leaves without pay, and intervening holidays (e.g., leaves from Friday to Monday will count Saturday-Sunday as leave). However, sanctioned leave is considered a working day.
3. Companies may offer up to 30 EL days, depending on the company's policy.
4. To simplify, understand that if a person has worked from January to December (leave calendar year), they should be given full EL credit to enjoy in the next year.
5. If an employee joins in the middle of the year, their EL can be credited on a pro-rata basis using the formula of 240 working days. This approach will be easier to follow.

Requesting seniors to kindly contribute additional insights to this thread.

Privilege Leave/Earned Leave

Privilege Leave/Earned Leave are leaves that are earned by an employee after a span of time in one organization. In no organization is PL/EL credited at the beginning of the year. Hence, as per your query, new joiners are not entitled to any PL/EL.

Developing HR Policies

You need to develop a few HR policies, and the Leave policy is one among them. However, please ensure that utmost care is taken while framing a policy. There can be many loopholes if policies are formed without research, study, and discussions with seniors in the company, which can prompt employees to take undue advantage of the policy.