Understanding Leave Carry Forward Limits and Encashment Rules Under Factories Act, 1948: Can Companies Restrict to 10 Days?

Section 79(5) of The Factories Act, 1948

Section 79(5) of The Factories Act, 1948 states:

If a worker does not, in any one calendar year, take the whole of the leave allowed to him under sub-section (1) or sub-section (2), as the case may be, any leave not taken by him shall be added to the leave to be allowed to him in the succeeding calendar year.

Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child.

Clarification on Leave Carry Forward and Encashment

Please clarify whether the management (registered under the Factories Act) can restrict the leave carried forward to 10 days. If a minimum of 30 days carry forward is to be provided by the company, are there any case laws?

Furthermore, why should only Basic + DA be considered for leave encashment when the gross salary is considered for loss of pay?

Dear Harish Ji, my opinion on your queries is as follows:

1. You cannot restrict the leave carried forward to 10 days. However, you can start the practice of encashment of leave over and above 10 days.

2. It is not the minimum but the maximum limit. The rationale behind this is that workers are encouraged to avail their leave rather than carry them forward.

3. Firstly, the minimum wage mandated to be paid to the workers consists of basic and dearness allowance. Therefore, for leave encashment, only these two components are relevant. Secondly, other allowances are payable on a monthly basis; hence, there is no requirement to pay them again for that particular month when encashing leave.

Thank you.