How Much Earned Leave Can I Encash If I Joined in March 2022 and Leave in October 2024?

Hi, this is my company's policy for EL - Earned Leave (EL) means leave earned in respect of the period of service with the company and granted on a full day.

Every staff member and official is entitled to privilege leave for a total period of not less than fifteen (15) working days after every twelve months of continuous employment with pay in a financial year. Employees must submit their leave application through HRIS at least a week prior to their preferred dates of availing leave.

Employees will take leave only after obtaining approval. In the event that an employee goes on leave without approval, it will be deemed that the employee has been absent from work without permission, and the period of absence will be treated as leave without pay. Employees who join in the middle of the year will be entitled to annual leave on a pro-rated basis, subject to completion of a year.

Leave Policy Details

I - EL cannot be clubbed with Casual Leave (CL).

II - An employee who has completed a period of four months in continuous employment shall be entitled to not less than five days of privilege leave for every such completed period.

III - EL is accrued at a rate of 1.25 days for every month worked and can only be availed after confirmation. An individual earns it and it is accumulated. They can avail it only in the next year or working after 180 days.

IV - A maximum of 5 days of EL can be rolled over to the next year, and the maximum accumulated/encashable EL would be 45 days. The leave encashment can be done for a maximum of 45 days only at the time of separation from the company.

If an employee resigns, what should be the leave encashment number for him if he joins in March 2022 and leaves the company in Oct 2024?

Hi, First of all, the meanings of EL and PL are different. Earned Leave (EL) is a type of paid leave granted to employees for their service after the completion of a month. The accrual rate of EL is 1-1.5 days per month (it varies from organization to organization). The balanced EL or unused EL may be carried forward to the next year, which is not to exceed 30 days (also varies from organization to organization). Privilege Leave (PL) is similar to EL but is often granted annually.

If your organization's EL policy allows the accumulation of a maximum of 45 days of EL, then the encashment will be made for only 45 days.

Regards,
Tapan Kumar

Thanks, Tapan, for your reply. The issue here is that my Finance team is stating that according to the policy I shared above, we carry forward 5 EL days to the next year's balance. Therefore, the carry-forward number is only considered for EL encashment, not the accrual balance. I am confused about this. Could you please refer to the policy mentioned above and share your insights?

Hi, It seems to be PL, not EL, because the PL is granted annually while the EL is accrued monthly. Both have different meanings. The PL usually has a fixed annual limit, whereas the EL has a cumulative limit. So, maybe the company has a policy of not transferring more than 5 days of PL annually.

Regards,
Tapan Kumar

Yes, it's EL; we don't name it PL. So, what are you suggesting in this case? We carry forward a 5 EL balance to next year's 15 eligible EL, which totals 20 EL per annum. If someone resigns, do we need to encash 20 EL or only the 5 carry forward EL?

Please help me with this (for the Maharashtra perspective of the Factory Act, rules, and Shop and Establishment Act):

Leave Entitlement and Carry Forward

1. As per the Maharashtra Shop and Establishment Act, Factory Act, and rules in Maharashtra, how much PL, SL, and EL are applicable, and how much can be carried forward?

Clubbing of Leaves

2. As per which rule in the S-E Act and Factory Act is the disallowance of clubbing certain leaves specified?

Sandwich Leave Policy

3. Sandwich leave... Is there any specific rule? (I can't see any. If management or employees inquire about the act it falls under, I don't know.)

Leave Eligibility for New Joiners

4. For new joiners, generally, leave is applied upon confirmation, but in the factory rules of Maharashtra, it is mentioned that employees are eligible in 90 days. Nothing is mentioned in the Maharashtra S-E Act. If yes, please help.

EL Payout Calculation

5. Is EL payout based on Basic + DA or Gross?

Thanks

To calculate earned leave encashment for an employee who joined in March 2022 and leaves in October 2024, follow these steps:

### Understand Leave Entitlement
- Typically, employees are entitled to a certain number of earned leaves per year, often calculated as:
- 15 to 30 days per year (depending on company policy).
- For this example, let's assume the policy grants 15 days of earned leave per year.

### Calculate Total Earned Leave
- Duration of Employment:
- From March 2022 to October 2024 is approximately 2 years and 7 months.
- Earned Leave Calculation:
- For 2 full years: 15 days/year × 2 = 30 days.
- For the remaining 7 months (assuming a pro-rata calculation):
- 15 days/year ÷ 12 months = 1.25 days/month.
- 1.25 days × 7 months = 8.75 days (usually rounded to the nearest whole number).
- Total Earned Leave: 30 + 9 (rounded) = 39 days.

### Leave Encashment
- If the company allows encashment of earned leave, the employee is entitled to be paid for the accrued days.
- Calculation for Encashment:
- Determine the employee's basic salary or average salary for encashment purposes.
- Multiply the number of encashable leave days by the daily wage (monthly salary divided by the number of working days in the month).

### Example Calculation
- Monthly Salary: ₹30,000.
- Daily Wage: ₹30,000 ÷ 30 = ₹1,000.
- Encashment Amount: 39 days × ₹1,000 = ₹39,000.

### Company Policy and Legal Compliance
- Ensure compliance with company policies regarding leave encashment.
- Check any legal provisions that may affect encashment, particularly if the company has more generous leave policies.

### Summary
In this case, the employee would be entitled to encashment for approximately 39 days of earned leave upon leaving the company in October 2024. Always ensure to confirm specific policies and legal guidelines with your HR department or legal counsel.