Legal Risks of Limited Leave: Is Offering 15 Days Annually Fair to Employees?

Dear professionals,

Legal consequences of leave policies

Could there be legal consequences if a company only allows 15 casual and sick leaves, granted semi-annually as 7.5 for each 6 months? Some employees are asking for 12 casual and 12 sick leaves. The management hesitates to provide that amount of leave; is it reasonable to offer 15 instead?

Current leave provisions

Furthermore, we presently provide 12 earned leaves for permanent employees. Looking forward to your assistance.

Thank you

Understanding Leave Policies for Different Organizations

First, make it clear the nature and size of your organization. If you are referring to a factory as defined in the Factories Act 1948, then the leave provisions in it have to be followed. Otherwise, it would be the Shops & Establishment Act of your state (Kerala?) that has to be followed.

Please bring clarity on these issues.

Leave Entitlements Under Kerala Shops and Commercial Establishments Act

In a factory-type operation, the leaves you are currently providing exceed the legal requirements. However, if you fall under the Kerala Shops and Commercial Establishments Act, you are expected to provide 12 days of Casual Leave (CL) and 12 days of Sick Leave (SL) annually. Each of these can be given proportionately at the rate of one per month.

Earned Leave Provisions

Earned Leave (EL) is only admissible to employees who have completed 12 months of service, with a total of 12 days. To synchronize the crediting of leaves across the organization, it is advisable to credit EL on January 1st for all employees. For those who joined during the preceding year, EL should be given proportionately based on the months worked. This adjustment is acceptable even to law enforcement officers.

Eligibility for Earned Leave

Granting EL solely to permanent employees is not permissible; it must be provided to all employees, whether permanent or temporary, who have worked for 12 months. If you wish to withhold EL from probationers, you may do so for 12 months, and need not credit their EL on a pro-rata basis in January. However, once they complete 12 months, you should credit them with 12 days of EL.

Employee Rights Under Labor Law

Under labor law, anyone engaged in work connected with the business is considered an employee. All employees must receive social security and employee benefits, including work hours, rest intervals, weekly offs, and leave with wages. There is no distinction between temporary and permanent employees regarding leave with pay. You can terminate a probationer without notice, as they have no lien on employment, and temporary employees cannot demand permanency. However, you cannot refuse to grant leave, require them to work more than 8 hours a day or 48 hours a week, or work continuously for more than 10 days. While paying overtime wages or granting compensatory holidays are remedies, you cannot demand such working conditions.

Madhu T.K., thank you for your update. If the management is unwilling to implement the proposed changes, what legal consequences might they encounter aside from the potential employee turnover and burnout? Even though prioritizing the well-being of employees is crucial, exploring the legal implications is essential.

Leave Regulations Under the Kerala Shops and Commercial Establishments Act

Leaves are regulated by Section 13 of the Kerala Shops and Commercial Establishments Act. When the law states that the employer is obligated to provide 12 days of casual leave (CL), 12 days of sick leave (SL), and 12 days of earned leave (EL), that is the law. Failure to provide these entitlements can result in serious non-compliance, and the enforcing officer may penalize the employer.

During an inspection, an inspector will likely identify several areas of non-compliance. The HR Manager bears the responsibility of guiding the employer to ensure the organization is legally compliant in all aspects. Regardless of whether the rules are being implemented, it is crucial to inform them of these regulations. Neglecting to do so may lead to consequences.

It's important to note that employers of smaller companies often pay little attention to the legal aspects of HR. This insight is based on my experience in the field spanning over three decades.