Are Our New Annual Leave Policies Compliant with Indian Labour Law? Seeking Your Insights

In my current organization, we have made a few changes in the leave policy. Previously, the leave was segregated into EL, CL, and SL. Now, we have combined all the leaves to create an Annual Leave entitlement of 32 days per year. This new policy includes Maternity and Paternity Leave separately, and we also observe separate holidays for Public and Festivals.

Out of the total 32 leaves, 18 leaves are allowed to be carried forward. The primary objective behind this restructuring is to provide employees with the flexibility to utilize their leave days as per their requirements.

I would like to confirm whether our current policy complies with Indian Labour Law. Your suggestions and recommendations on this matter would be greatly appreciated. Please share any relevant links that support the acceptability of our new policies under Indian Labour Law.

Thank you!

You are on the right track. The move will reduce the clerical work in the organization. Please pass a reasoned order stating that the existing multiple varieties of leave are merged into the annual leave. I hope that by merging the leaves, you have ensured the aggregate leave on different counts.

Dear Anjali, it seems you are from Delhi, and the Delhi Shops and Establishment Act is applicable to you. As per this Act, you are liable to give 15 days of privilege leave and 12 days of sickness/casual leave, totaling 27 days, other than festival holidays.

You are providing more leave than required by law. Therefore, there is no issue in merging both types of leave into one. However, you must ensure that the accumulation limit does not exceed three times the privilege leave.

It is suggested to have an understanding signed with the employees and then incorporate the change in the policy manual. This is because matters related to leave with wages and holidays fall under schedule IV of the ID Act, for which a notice of change is required under section 9A.

I may add, consider these also:

1. Whether your establishment and employees are covered under the ESI Act - study the impact from the applicable provisions of the act's point of view.

2. If leave encashment - while in service and/or as a full and final settlement is in practice, merging CL and SL will have some impact. This is because CL and SL are not encashable. The upper limit for accumulation may pose some issues as it might curtail the maximum days of accumulation.

3. Similarly, CL, wherever separately practiced, generally is not allowed to be combined with EL/SL when availed.

4. CL is open for credit in advance at the entry level for newly joined employees. Whereas EL/SL accrues after one year of service rendered. If so, the inconvenience faced by them has to be addressed.

5. CL is meant for availing at short notice, whereas EL/SL requires approval in advance as a rule.

6. Is this proposal welcomed by all? How about amending the standard operating procedures of your firm?