Is Leave Encashment a Right or a Choice? Seeking Clarity on IT Firm Policies

I recently left an IT firm, and during F&F, I discovered that they are not providing leave encashment for my earned leaves. The amount, if processed, should be somewhere close to 50k INR. Can someone please help me understand if leave encashment is mandatory or if it totally depends on the organization whether they wish to offer it or not?

Leave Encashment in IT and ITES Establishments

IT and ITES establishments are covered under the respective State Shops and Establishments Act. If you fall within the definition of the term "person employed" or "employee" as defined under the Act of your State, you are eligible for earned leave or privilege leave. The unavailed portion of this leave can be accumulated up to a certain ceiling prescribed by law. The encashment of this leave forms part of the terminal benefit of employment whenever it takes place, for whatever reasons.

If the employer refuses to pay, you can make a complaint to the area Deputy Labor Commissioner.

The reply by Mr. Umakantha is correct.

Jharkhand Shop & Establishment Act

Sec 16(9): If the employment of an employee who is entitled to leave under sub-section (1) or sub-section (2), as the case may be, is terminated by the employer before he has taken the entire leave to which he is entitled or if, having applied for and not been granted such leave, he quits his employment before he has taken the leave, the employer shall pay him the amount payable under section 17 in respect of the leave not taken. Such payment shall be made before the expiry of the second working day after the day on which his employment is terminated and to an employee who quits his employment on or before the next pay day.

The rules apply to IT personnel as much as other employees. Unfortunately, you have not provided key information needed for a more accurate reply. We are even guessing the office was in Ranchi.

Thanks a lot for your replies. I forgot to mention the location since I thought labor laws are central. My company is registered in Bangalore, which is in Karnataka. Could you please help me understand if leave encashment during the time I leave is mandatory or not as per the act there?

Hello Folks,

I referred to the link below for the Karnataka Shops and Establishment Act: https://www.indiacode.nic.in/bitstre...62_%28e%29.pdf.

On pages 21 and 22, it states:

If the employment of an employee who is entitled to leave under sub-section (1) is terminated by the employer before he has taken the entire leave to which he is entitled, or if having applied for and not been granted such leave, the employee quits his employment before taking the leave, the employer shall pay him the amount payable under section 16 in respect of the leave not taken. Such payment shall be made, where the employment is terminated by the employer, before the expiry of the second working day after termination, and where an employee quits, on or before the next pay day.

Does this confirm that the Karnataka Shops and Establishment Act also mentions that I should be paid Leave Encashment without fail? Your help is highly appreciated.

Dear friend,

This reply is in response to the query you raised in your private message as well.

Factories Act and Shops and Establishments Act in India

In India, all manufacturing activities are covered by the Factories Act, 1948, which deals with the working conditions of workers employed therein, among other aspects. In respect of shops and other commercial establishments, almost all states have their own shops and establishments acts pertaining to the conditions of employment and other aspects.

Applicability of Shops and Establishments Act

Each and every business entity engaged in one or more predominant activities like buying or selling of goods, providing services like financial transactions, advertising, forwarding, public amusements, boarding and/or lodging to the general public or customers, or any other establishment notified by the government as such situated within the territory of an Indian state would be an establishment under the particular state's Shops and Establishments Act. It would automatically imply that in respect of an establishment registered in a particular state and having branches in other states, different Shops and Establishments Acts would apply depending on each such unit's geographical location. However, there can be variations in the extent of service conditions among the various state acts on the same subject. This multiplicity of statutory application fastens the compulsion of devising uniform rules pertaining to service conditions on establishments having pan-India presence. Though the central government has brought in the Model Shops and Establishments (Conditions of Employment) Rules, 2016, its adoption is left to the choice of the states.

Leave Encashment in Karnataka

Coming to your query, whether you were employed in Karnataka State or elsewhere at the time of your termination of employment, your employer has to pay you the salary for the entire earned/privilege leave at your credit on that date.

Thanks for your detailed reply. I have already emailed my employer, but they are not agreeing, saying that internal company policy doesn't allow it.

That's why I wanted to send them an email that points out the exact legislation under which they fall so that they can't beat around the bush. I am fine with sharing the name of the company with you via private message so that you can check which act applies to them.

If, even after pointing out the exact legal binding they have, they still don't agree, I would raise a grievance through the available channels.

Your help throughout is highly appreciated.

Adding a few more details:

The company's registered address is in Bangalore (the address which used to appear on the payslip). I was employed at the Bangalore location but was working from home due to the pandemic. I joined the company in September and left in December, accumulating 8 days of leave.

Is Leave Encashment Mandatory Under Labour Laws for IT Professionals?

I think you will get your answers, but one important thing we should know is the post you hold. If it is a managerial or similar capacity, then the company's policy is implemented.