How Do You Handle Casual Leave Deductions in Final Settlements When Employees Resign Early?

Dear professionals, we credit 12 casual leave days to the employee's leave account starting from January. This means 1 casual leave day is accrued per month. However, if an employee uses up all the casual leave days and resigns in May (in this case, he is entitled to only 5 CL instead of 12), can we deduct the extra 7 CL payment from his full and final settlement? Please advise on how to adjust casual leave days when preparing the full and final payment statement for an employee. Your guidance is appreciated.

If you have sanctioned 12 casual leaves in five months, how can you recover it from the employee? You should not have approved the leave but rejected or marked the leaves as LOP. It is your duty to ensure that such leave is sanctioned pro rata, and you cannot put it on the shoulders of the employee. Recovering the 7 days' leave can be challenged by the employee, especially if he is a workman.

Hi, At times, it is common for employees to avail leave in excess of what is allotted for the whole year. However, for leave exceeding 2 days, Casual Leave (CL) should not be considered, and it should instead be adjusted from the Earned Leave (EL) balance. You may communicate with the employee to explain the situation and initiate the recovery of payment for the excess leave that was taken.

It basically depends on the leave rule. In the leave rule, if it is mentioned that the employee is eligible for 12 days of CL per year but in the case of termination of the job for whatever reason, it will be calculated on a pro-rata basis, then there is no harm in adjusting excess CL enjoyed from F & F.

If it is not mentioned, then the employee can enjoy the entire eligible leave beforehand, and it should not be adjusted during F & F.

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You have already credited 12 days of CL in the employee's leave account, and the employee concerned has used the full 12 days before separation. Generally speaking, you cannot adjust the same.

Leave Policy Considerations

Does your leave policy specify that one CL is only eligible for employees for one month? In that case, you can adjust the balance of 7 days' pay in the F&F settlement after communicating it to the employee. If your leave policy is silent about this, it is better to allow 12 days, as he has already availed it.

Scenario of Mid-Year Resignation

You also have to consider another scenario: suppose another employee leaves the company in the middle of the year without availing any CL. In that case, will you encash CL, pro-rated to the number of months he has put in at your company?