Navigating Leave Encashment: Do We Owe This Probationary Employee for Unused Leave?

One of our staff members has been working with us for the last 9 months, but his probation period was extended due to performance issues. Now, he has submitted his resignation, and we need to pay him his full and final settlement. During the probation period, he was eligible for CL-1 (casual leave) in a month, and he availed the same. As per company policy, we grant all leaves from the Date of Joining (DOJ) on a pro-rata basis, but employees can only use CL during the probation period and other leaves after confirmation.

Since he was under the probation period, his EL balance was 10 days at the time of resignation. Could you kindly advise if, as per the Tamil Nadu Shop Act, we are required to make leave encashment in the full and final settlement or not?

Thank you.

Entitlement to Earned Leave under the Tamil Nadu Shops Act

As per the Tamil Nadu Shops Act, the person mentioned here is not entitled to Earned Leave.

"Every person employed in any establishment shall be entitled, after twelve months of continuous service, to holidays with wages for a period of 12 days, in the subsequent period of twelve months: provided that such holidays with wages may be accumulated up to a maximum of twenty-four days."

Relevant Clauses for Leave Entitlement

However, the second clause is also relevant in this case:

"Every person employed in any establishment shall also be entitled during his first twelve months of continuous service after the commencement of this Act, and during every subsequent twelve months of such service:
(a) to leave with wages for a period not exceeding twelve days, on the ground of any sickness incurred or accident sustained by him; and
(b) to casual leave with wages for a period not exceeding twelve days on any reasonable ground."

Application of Clauses if Leave is Credited

So, if you have already credited EL, SL, CL, etc., to the employee, the following clauses are applicable:

(3) If a person entitled to any holidays under subsection (1) is discharged by his employer before he has been allowed the holidays, or if, having applied for and been refused the holidays, he quits his employment before he has been allowed the holidays, the employer shall pay him the amount payable under this act in respect of the holidays.

(4) If a person entitled to any leave under subsection (2) is discharged by his employer when he is sick or suffering from the result of an accident, the employer shall pay him the amount payable under this act in respect of the period of the leave to which he was entitled at the time of his discharge, in addition to the amount, if any, payable to him under subsection (3).

Courtesy: https://www.stacowiki.in/en/acts/st-...lishments-act/

Hello,

The candidate is not eligible to get leave encashment as he is not confirmed yet in the organization. Also, according to me, CL does not come into encashment; only PL and ELs do. You can refer to your policy as well. If you have mentioned the encashment of CL at the time of FnF, then you should provide him with his amount of leaves.

Thanks

I have not dealt with the Tamil Nadu Shops Act. However, please refer to sub-clause (3) of the relevant section reproduced by Consultme above. It states that an employee, on being discharged or quitting employment, shall be paid the amount payable under the Act (probably referring to leave wages) if he is not allowed to avail the holidays before he quits. I understand that the employee is allowed encashment of earned leave at his credit at the time of quitting employment.

So, go through the relevant section of the Shops Act. Views are invited from HR professionals dealing with the Tamil Nadu Shops Act.

Regards, B. Saikumar HR & Labour Relations Consultant

Leave Encashment Policy

Normally, your leave policy should state which components of the salary will count for leave encashment. In the absence of such information, you should refer to the Shops Act of your State or the Factories Act, depending on the nature of your establishment, whether it is a commercial establishment or a manufacturing concern (factory). The standard practice is that the wages an employee receives while on leave will also be paid at the time of leave encashment. This essentially means basic salary plus all other allowances, excluding overtime (OT) or bonuses. It is advisable to consult the relevant provisions in your Shops Act.

B. Saikumar
HR & Labor Relations Consultant