Can We Legally Reduce Leave Days for Factory Workers Without Breaking Rules?

Current Leave Policy for Factory Employees

We have a factory in the Industrial Area with 30 employees, including daily wage workers and technical/administrative staff. We are currently providing 30 days of PL, 7 days of CL, 4 days of SL, and 9 public holidays to staff, and 18 + 7 + 4 + 9 to workers if they are present on all working days. The factory operates 6 days a week. We also offer leave encashment if leaves are not utilized.

Concerns About Current Leave Practices

This has been the old practice since the factory started, but I now feel that we cannot afford to provide so many leaves. Can I reduce the number of leaves, and what is the required number of leaves to be legally given?

Leave Provision During Covid

During Covid, we paid 50% salaries for the absent period to all. Do we need to provide PL even for this period?

Leave Policies and Legal Considerations

The scale, type, and method of availing leave for your employees, including workmen, might exceed what is statutorily prescribed. However, these benefits have become customary over time. Leave, holidays, and discontinuation of customary benefits are conditions of service listed under serial numbers 5 and 8 of the IV Schedule to the ID Act, 1947, the alteration of which necessitates issuing a 21-day notice in writing before implementation under section 9-A of the Act.

If there is a mutual agreement with the concerned workmen in this matter, no such notice is necessary.

Impact of the Pandemic on Leave Policies

The pandemic and its impact on the industry are not expected to be permanent. Normalcy can soon be restored. Despite the directive of the State under the DM Act, 2005, you have only paid half the salary for the period of non-employment due to the lockdown. Attempting to unilaterally reduce existing leave benefits further would be seen as exacerbating the situation.

Therefore, it is advisable to commence a dialogue with the employees and strive to reach an amicable settlement in this regard to prevent industrial unrest.

Thank you for your valuable views. Unfortunately, a dialogue is futile, and any kind of reduction in entitlements is just not accepted. I am saying this from past experience. Hence, I just wanted to have a view of others on whether such a thing is possible unilaterally. It seems it may be difficult to do.

I recommend you check the provisions of the Maharashtra Factories Rules, 1963. These rules have been amended time and again. The number of days of leave can be more than specified in this act but not less. If you are unable to reduce the number of days of leave, then you may reduce the salary proportionately. As long as you pay the minimum wages, everything is fine. Anything beyond that is at the discretion of the top management.

Thanks,
Dinesh Divekar

Dear HBJ, existing rights and benefits of employees falling under the category of "workman" cannot be reduced or modified to their disadvantage by the employer according to his whims and fancies. Even in the case of others, the employer is bound to honor the terms of the contract of employment already agreed upon and cannot adversely modify them without the concurrence or consent of the employee. In the event of insurmountable difficulties such as continued losses due to market conditions, technological changes involving heavy investments, etc., the employer can change those service conditions mentioned in the IVth Schedule only after 21 days' notice. Even then, it might be questioned by the affected workmen by means of an industrial dispute under Section 2(k) of the Industrial Disputes Act, 1947, and in such a situation too, the employer must be in a position to convince the tribunal. That's why you have to hold discussions with the employees and at least try to get their consent for such a reduction in benefits temporarily for some time. If you fail to do so, the disgruntled employees would resort to all kinds of non-cooperation like work-to-rule, go slow, etc. The employer should always handle situations like this by keeping the long-run interest of the organization in mind.