Can Private Companies Have Different Leave Policies Based on Employee Tenure? Seeking Advice from HR Experts

Hi - Looking for inputs on the following issues from all seniors here,

Leave policy rules based on working years

In any private company leave policy, can we establish two sets of rules for casual leave based on an employee's working years in the company? For example:

0 to 2 years of working will get 12 CL
2 to 4 years of working will get 18 CL

I came across an old judgment that does not allow different rules for employees based on their entry year.

Case reference

PETITIONER: SALEM ERODE ELECTRICITY DISTRIBUTION COMPANY LTD.

Vs.

RESPONDENT: SALEM ERODE ELECTRICITY DISTRIBUTION CO. LTD. EMPLOYEES

DATE OF JUDGMENT: 03/11/1965 CITATION: 1966 AIR 808 1966 SCR (2) 498

If the statutory minimum number of leaves is 12 days for a year, then what is the issue if the company is giving 18 days CL for those employees who have more than two years of service with the company? It is possible so long as the benefits to the employees are higher than what is stated in the statute.

The Salem Erode Electricity Distribution Company case

In the case of the Salem Erode Electricity Distribution Company that is referred to, the issue was amending the leave rules so that employees or a section of employees would get leaves less than what is provided under the Standing Orders. Standing Orders are binding conditions of service, and any change in them shall be effected only by amending them with the consent of the employees. Obviously, the employees who would be affected by the orders resisted, and the court also stated that there should not be any discrimination. Moreover, the case pertained to an incident of the late fifties and early sixties. The industrial scenario then was entirely different from today. Today, what is looked into is whether there is any reduction in employee benefits or not. If there is no violation of the law, what is wrong with it? It is quite natural that there may be different treatment in salary fixation for employees who have more than 2 years of service and those who have just become eligible for an increment. Leaves are also like this, and employees with a certain number of years of experience shall get more leaves (like an additional increment or loyalty bonus) than a fresher or those with one or two years of service.

In many organizations, even for the retention of employees, senior employees are given some extra leave, and there is nothing wrong.

Regards, R R Kapoor

Vadodara

There is nothing in the law that prevents you from having two sets of leave rules. However, there needs to be a distinct difference between them. Experience and the number of years in the company are acceptable classifications.

But you need to follow the rules (standing orders, industrial dispute, factory/Shop, and establishment). I suggest you make two categories of employees in the standing orders and then create leave rules for each. Just ensure you don't go below any other statutory requirements.

At the same time, you cannot change the terms of employees who are already working in your company to their detriment. Keep that in mind.

First of all, it's not preferable to have two sets of leave rules for different classes/grades of employees. The majority of the organized sector used to have leave rules exactly as provided in the applicable Acts/Rules such as the Factories Act, Rules, Shops & Commercial Establishments Act/Rules, and so on. Of course, more privileges than what has been provided in the statute are not going to be disputed. However, if a Standing Order is applicable to your establishment, you can draft the SO, submit it to the appropriate authorities, get it approved, and implement it in letter and spirit.

Generally, EL and Sick/Medical/Accident leave are stipulated in the statute. However, Casual Leave, Extraordinary Leave, or Leave Without Pay are specific to the legacy of the existing establishments, which will be followed as precedents/past practices. There is a legal bar/inconsistency if you decide to have two sets of leave rules within your establishment if the leave days are not less than those provided in the applicable acts/rules.

It's pertinent to note here that in 2019 and 2020, 29 central labor laws were amalgamated, rationalized, and simplified into four labor codes, namely, the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health & Working Conditions Code, 2020. After the introduction of the New Labor Codes, there are some changes in the leave policy as well. One of the labor laws, namely, the Occupational Safety, Health, and Working Conditions Code, states that an employee cannot accumulate more than 30 days of paid leave in a calendar year.

The new labor laws divide employees into two categories: 'workers' and 'employees'. A 'worker' is an individual who has no managerial or supervisory role. An 'employee' covers all individuals who are workers as well as those working in a managerial and supervisory position in an organization. Certain provisions under the new labor laws are not applicable to employees working in a managerial or supervisory capacity. This means that managers (employees working in a managerial/supervisory role) are not likely to get many benefits vis-à-vis 'workers' under the new labor laws. Please refer to the applicable New Code(s) and State Rules made thereunder and the date of its implementation as per the pertinent Gazette Notification.

Leave Rules for Karnataka

Here is a snapshot of various leave rules as per the Karnataka Shops & Establishments Act:

Item: Annual / Privileged / Earned Leave (AL/PL/EL) - 18 days
Casual Leave (CL) - NA
Sick Leave (SL) - 12 days
Maximum AL/PL that can be carried forward - 30 days
Working hours in a day - 9 hrs.
Total hours in a week - 48 hrs.
Rest Interval - 1 hour rest after 5 hours of work