Leave Encashment Rules in Maharashtra: Can Employees Cash Out Before 1 Year?

Hi everyone! I wanted to understand what the leave encashment rule is as per the law. I understand from reading a lot of answers on CiteHR about leave encashment that it is available only after completing 1 year with the firm (please correct me if I am wrong here).

We are an IT company in Maharashtra with 200 employees. Our employees accrue leaves during their probation period (first 6 months) but have access to these leaves only after completing the probation. Now, if someone were to resign in the 7th, 8th, 9th, or 10th month, would they be eligible for leave encashment even if they have not completed 1 year? All help will be much appreciated. Thank you for your time.

Leave Entitlement and Encashment Practices

After the completion of a 1-year leave entitlement clause, it will be applicable, which is a practice by many organizations. However, there are other practices as well, such as leave accumulation at the end of the month.

Leave Policy After Probation

In this organization, after 6 months, i.e., after the completion of the probationary period, leave is allowed. I suggest reviewing the S & E Act of the state to follow leave rules. The organization may also have its own leave rules, but they should not be less favorable than the statutory limit.

Leave Encashment Eligibility

If any employee leaves the organization after 6, 7, 8 months, etc., the employee may receive leave encashment, as the eligibility criteria is after 6 months if not stated otherwise in the organization's leave rules or the S & E Act.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons]

Your question is, "If someone were to resign in the 7th/8th/9th/10th month, would they be eligible for leave encashment even if they have not completed 1 year?" If someone resigns from your company, you have to give leave encashment because the leave balance is in the employee's leave account. You may also allow the employee to avail leave before leaving the company.

"If they have not completed 1 year" will apply to those employees who are still in your company. It depends only on the Shops and Establishments Act of the state or your company rules.

There is no specific law in India that provides for the encashment of leave. It is mostly governed by internal rules that companies have.

Maharashtra Shop & Establishment Act

You need to look at the Maharashtra Shop & Establishment Act (ensure you see the 2017 act and not the older one). There is a clause stating that accumulated leave not used is to be encashed upon separation. However, it then comes to what is considered accumulated. If one is not eligible, then it is not accumulated.

Again, please note that the act basically provides for the calendar year as the starting point of accumulation for the previous year's leaves to be used in the next year.

You need to check your internal rules (plus what standing orders say) and what the statutory regulations are under the Shop and Establishment Act and choose the better of them.

In case the leave accumulated is more than 30 days, the company or employer will need to pay for the excess leave to the employee. According to the 'Occupational Safety, Health and Working Conditions Code'—one of the 4 New Codes on Labour laws, 'employee' in this case means those who are not in managerial or supervisory roles.

Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020

Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), has a number of conditions with respect to availing annual leave, carry forward, and encashment. Section 32(vii) allows a worker to carry forward annual leave to a subsequent calendar year, up to a maximum of 30 days. In case at the end of the calendar year the annual leave balance exceeds 30, then the employee will be entitled to encash the excess leave and carry forward 30 days to the next year.