Is Our Leave Policy at Risk? Seeking Clarity on UP Shop & Establishment Act Compliance

Hello team members,

I am writing to get more valuable input on a particular aspect. I will mention via an example. There is a company A that is into IT software, having its registered office in Delhi. However, its corporate office has been in Greater Noida for the last 5 years, where the entire team of around 100+ white-collar employees (all software developers) operates from this office. The organization has all the other statutes being followed, such as PF, ESI, Gratuity, GST, etc.

Registration under the UP Shop & Establishment Act

I am not aware if they have got themselves registered under the UP Shop & Establishment Act or not. Though I believe being an IT company, they should come under the Shop & Establishment Act.

Questions on Applicability and Leave Policy

- Even if they have not got themselves registered, will, by default, the provisions of the UP Shop & Establishment Act be applicable to them, mainly which are very basic and critical?
- The main question is with reference to the leave policy and entitlement. A senior is of the opinion that we can give leave entitlement as per our wish with no obligation for encashment or accumulation; however, I am of the opinion that leave entitlement/encashment/accumulation of (PL/EL + CL/SL) for employees should be as per the UP Shops & Establishment Act.

I wanted to understand from fellow HR and legal experts here whether the senior's view of giving leave entitlement, accumulation, or encashment as per their own will is correct or not. I am of the opinion it is not, so would like to get a more thorough understanding here by experts. Also, will there be any legal implication if it is not given as per the statutes?

Thanks,
Vikram

Leave Accumulation and Encashment

Carry forward and accumulation to a certain extent of the earned leave is permissible under the Act. However, surrender of leave or encashment of unavailed leaves is not available as a right of the employee. An employee is entitled to get the unavailed leaves encashed when he leaves the organization.

Legal Implications of Non-Compliance with Labor Laws

If any employee complains to labor authorities or a labor inspector during a random inspection and discovers that you have violated provisions of the Act regarding leave and encashment, they can initiate prosecution against your company. If neither of the above-mentioned situations occurs, you may go unnoticed until an inspection takes place on a future date. It is always advisable to follow the statute book and not act based on personal whims and fancies.

Dear Mr. Ashok,

Thank you for your input. I am of the same opinion. I also understand that an IT company falls under the ambit of the Shop & Establishment Act. Could you please share your thoughts on this? In case the company is not registered under the Shop & Establishment Act, would the leave entitlement still need to be managed according to its regulations?

Dear Mr. Madhu TK,

Thank you for your input. I am trying to understand if, as a business, an IT company falls under the ambit of the Shops & Establishment Act. If the company has not registered itself under the Shops and Establishment Act, will some basic statutes like leave entitlement and other rules still be applicable to it?

Thanks

Registration under the relevant Act

Registration under the relevant Act (if it is an IT company, it would come under the State Shops and Commercial Establishments Act) is a prerequisite to run a business. Non-registration under the said Act will not make the employees ineligible for their rights under the Act. As such, even if the company remains unregistered, the employees will not lose their rights such as leave, minimum wages, holidays, weekly off, hours of work, etc.