Can Companies Deny LTA Payment After Resignation? Let's Discuss Final Settlement Policies

Payment of LTA at the Time of Final Settlement

In the topic of payment of LTA at the time of final settlement, can a company have the following remarks in their appointment/agreement letter?

LTA should be availed during the service tenure of the employee and cannot be claimed after resignation.

Exclusion of LTA from CTC

Or, can a company exclude LTA from CTC? By doing this, can they deny paying LTA for resigned employees?

Most organizations have a clause stating that LTA/LTC is allowed to the employee while in service, and a resigned employee cannot avail it. This is common in the Government/PSU sector. Indeed, allowing LTA to a resigned employee is counterproductive, as the organization would need the continuous services of the resigned employee during the notice period to ensure continuity and smooth takeover purposes.

LTA is a cost incurred by the organization and hence would be a part of the CTC. Denial of LTA to a resigned employee is not linked to its inclusion or exclusion from CTC. As a matter of fact, CTC is a notional calculation based on employee entitlements, and an actuarial value is added for certain benefits, but it does not mean that the employee would receive all that money.