Is Leave Encashment Possible for Employees Who Worked Less Than Two Months?

Dear All,

Good morning, we had an employee who worked with us from 05.01.2023 to 13.02.2023. We are processing his F&F, but we have a confusion. Is he eligible to get leave encashment of 1 EL or not? If not, what is the fixed criteria to pay for Earned Leave?

Let's suppose an employee worked in an organization for only 4, 5, 6, or 7 months. Are they eligible for leave encashment?

Please advise.

Eligibility for Earned Leave (EL)

An employee will get earned leave (EL) only when they work for a required number of days. This can be 240 days in the preceding year or 12 months, depending on the Act applicable to your organization, such as the Factories Act or Shops and Commercial Establishments Act. None of the Acts specify that EL should be paid upon completion of just one month. It is a legal matter when considering prorated working days for six months or a quarter of a year. In cases where an employee has worked for, for example, 6 or 7 months, a decision can be made on granting EL.

Leave Encashment Under Factories Act and Shop Act

The Factories Act provides for the credit of leave (which can be used or encashed upon termination) on January 1 of each year based on the previous year's number of days worked.

The Shop Act in most states follows the same rule.

If your company voluntarily follows a more beneficial policy, the law allows it. Whether that will be enforced and encashable will depend on whether you have specified it in the appointment letter or HR manual. If not, check whether it's in the standing orders (if applicable).

If you have not committed to it or it is not in the terms of employment, then it is not payable. You will be eligible only after working for 240 days as specified by Madhu-ji.