How Much Earned Leave Can Be Cashed Out When an Employee Leaves Mid-Year?

Dear All,

Please guide me on earned leave encashment when an employee separates, and Full and Final (FNF) settlement is done. As per policy, the maximum accumulation is 30 days. However, at the time of leaving, if the employee has earned leave in their account – for example, 25 days from the previous year and has earned an additional 20 days in the current year but is leaving in the middle of the year – is the employee eligible to receive leave encashment for 45 days, or will it be limited to 30 days?

Hi Suniti,

In this case, the total leave encashment will be done for 45 days. There is a capping on the total number of EL to be carried forward to the next year and not on the number of ELs encashed.

Regards,
Rahul

Dear Madam,

It is not known whether you are covered under the Shops and Establishments Act or the Factories Act. In either case, the maximum accumulation of earned leave (EL) is provided for in the respective Acts. Please refer to the same, and unless your company policy for accumulation is better, you may proceed with encashment as provided by the law.

Regards,
Vinayak Nagarkar
HR Consultant

Where is it mentioned that the EL encashment is mandatory in law?

Nature of business is hospitality/service sector, and as per the act and further company policy, an employee is allowed to accumulate a maximum of 30 EL. However, I need help with the encashment part.

Dear Buena Vista HR,

Being in the hospitality and service sector, you will be covered under the Shop & Establishment Act. I assume you are from Gurgaon, so the Punjab & Haryana Shop & Establishment Act applies to your employer. Section 14 (b) of the same act mentions the provisions to encash unutilized EL at the time of exit.

Regards, Rahul

Dear Suniti,

According to the Punjab Shops & Commercial Establishments Act, 1958, you are to encash only 30 days of earned leave (EL) as up to this number one can accumulate the EL. Therefore, in the Full and Final (F&F) settlement, you are to encash only 30 days of EL.

R N KHOLA

Rajasthan Shops and Commercial Establishment Act, 1958: Leave Encashment

My location is Rajasthan. As I read the Rajasthan Shops and Commercial Establishment Act, 1958, I couldn't find much on encashment at the time of Full and Final (FNF) settlement. However, clause 14(3) states that if an employee is dismissed or discharged during the course of the year, they are entitled to leaves with wages earned till that time at the rate laid down in clause 14(1), even if they have not worked for the entire period. After this, they can start exhausting their leaves.

Query on Voluntary Resignation

But what if an employee leaves on their own? I am not able to get clarity on that.

Best Regards,

Respected Learned Members,

Sec 14(d).1 of the Punjab & Haryana Shop & Establishment Act clearly mentions that the total number of days of leave to be carried forward to the succeeding year is 30; however, this should not be confused as the maximum number of leaves to be encashed at the time of exit.

I kindly request you to share citations of court judgments or any mention of the same in the said act, stating a limit on encashment of leaves upon exit.

Regards,
Rahul

Hi,

I worked in Noida and left the organization recently. However, when I asked for leave encashment as I had more than 30 leaves at the time of leaving, the organization denied to pay the same and held my FNF process. They are also threatening to mark my BGV as red. Is there any clause that organizations can use to deny payment in such cases? I need a better understanding of this part, so please help to confirm.