Can a Company Refuse to Pay for Unused Leave? Seeking Legal Insights and Calculations

I need guidance on the following issue. Please help me with the relevant Act and corresponding case law:

An employee based out of Mumbai, working with our company (Registered Office - Lucknow) since June 2015, resigned in March 2018. At the time of resignation, she had 19 days of Privilege Leave Balance in her account.

My questions are:

a) Is the company bound to encash her unearned leaves? If yes, then under which act, and if no, then what is the respective statute that supports this?

b) If the company is bound to encash leaves, what would be the calculation for it?

Is your organization covered by the Factory or Shop & Establishment Act? In either case, leave encashment should be processed accordingly.

The ex-employee has to be paid the unused privilege/earned leaves as part of full and final settlement of accounts upon termination/resignation from employment. It is not encashment; it is more of settlement of accounts. The calculation is done based on the monthly gross salary of the employee.

Both Section 79 of the Factories Act and Section 14 of the Shop Establishment Act mention the encasement of PL upon cessation of employment. In this case, you are bound to encash her unused privileged leaves.

The calculation will be: (Her last Basic Pay/30) * Number of PL to be encashed.

Regards,
Rahul Chhabra

Yes, your company is bound to pay or provide encashment of earned leave. In the instant case, the employee is eligible to receive payment for leave balance of 19 days along with leave earned during the year 2018 until her resignation.

The rate of payment is based on Basic+DA or Basic, as per your policy, or on which you calculate EPF, or the amount deducted for one day of absence.