Dear All,
We are in a process of reformulating our leave policy. So need suggestions and input on "how important it is to pay leave encashment against earned / privilege / yearly / annual leave" in case the leaves are neither lapsed nor utilized by the employees” as currently it is entirely management's discretion to allow the encashment of leaves to some employees who did not take a single earned leave in the past year(s).
And also at the time of settlement should a company pay the encashment for the earned leaves to the resigned-employee.
Your input is really important….
From China, Guangzhou
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5We are in a process of reformulating our leave policy. So need suggestions and input on "how important it is to pay leave encashment against earned / privilege / yearly / annual leave" in case the leaves are neither lapsed nor utilized by the employees” as currently it is entirely management's discretion to allow the encashment of leaves to some employees who did not take a single earned leave in the past year(s).
And also at the time of settlement should a company pay the encashment for the earned leaves to the resigned-employee.
Your input is really important….
From China, Guangzhou
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Dear Anjum,
Leave encashment depends upon the philosophy of management on leave.
But you must check whether there is any statutory liability for encashment of leave in your Law of Land (Labour laws).
While making a policy, the objective of the policy must be very clear, and then comes the implementation of the policy.
I have no knowledge of labor laws applicable in Pakistan, but in India, under The Factories Act, it is optional for both the employer and employee to encash or get the balance of earned leave encashed. At the same time, this leave must be earned by the employee while attending the office/factory.
Further, for encashment, management has to decide the basis of salary on which it is to be encashed. It may be Basic pay or Basic pay with Dearness Allowance or Basic pay along with all other allowances currently being paid as monthly salary. Here we adopt all these methods depending upon the thought of management and cost to the company.
Generally, encashment of earned leave is being made in all cases of resignation. But some of the establishments have adopted a discretionary option for the same.
In order to break the monotony of work or to minimize the stress level of their employees, some of the organizations have adopted a policy of compulsory leave. Travel expenses are being borne by employers to motivate the employees proceeding on compulsory vacation.
Please keep in mind while drafting the policy that some employees will keep on accumulating the leaves until their retirement or resignation. Though most employers feel happy with low absenteeism, there are cases where the performance level has gone down due to this.
In Europe and Japan, the policy of compulsory vacation has been accepted by most employers, and here in India, some of the big industrial houses and establishments have started adopting these practices.
So from a motivational point of view, encashment up to a level is good, but beyond that, money is not everything.
Leave is a must as every individual requires time for the family. So you can also choose compulsory availing of leave and encashment of leave on a percentage basis.
Regards,
Anil Anand
From India, New Delhi
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Leave encashment depends upon the philosophy of management on leave.
But you must check whether there is any statutory liability for encashment of leave in your Law of Land (Labour laws).
While making a policy, the objective of the policy must be very clear, and then comes the implementation of the policy.
I have no knowledge of labor laws applicable in Pakistan, but in India, under The Factories Act, it is optional for both the employer and employee to encash or get the balance of earned leave encashed. At the same time, this leave must be earned by the employee while attending the office/factory.
Further, for encashment, management has to decide the basis of salary on which it is to be encashed. It may be Basic pay or Basic pay with Dearness Allowance or Basic pay along with all other allowances currently being paid as monthly salary. Here we adopt all these methods depending upon the thought of management and cost to the company.
Generally, encashment of earned leave is being made in all cases of resignation. But some of the establishments have adopted a discretionary option for the same.
In order to break the monotony of work or to minimize the stress level of their employees, some of the organizations have adopted a policy of compulsory leave. Travel expenses are being borne by employers to motivate the employees proceeding on compulsory vacation.
Please keep in mind while drafting the policy that some employees will keep on accumulating the leaves until their retirement or resignation. Though most employers feel happy with low absenteeism, there are cases where the performance level has gone down due to this.
In Europe and Japan, the policy of compulsory vacation has been accepted by most employers, and here in India, some of the big industrial houses and establishments have started adopting these practices.
So from a motivational point of view, encashment up to a level is good, but beyond that, money is not everything.
Leave is a must as every individual requires time for the family. So you can also choose compulsory availing of leave and encashment of leave on a percentage basis.
Regards,
Anil Anand
From India, New Delhi
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Dear Anil, Thank you for such a comprehensive and prompt reply. Got some good points from your reply. Thanx again.... Still looking forward for more replies from HR professionals N gurus.
From China, Guangzhou
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From China, Guangzhou
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Hi,
I want help regarding PF deduction on leave encashment. I have the following case:
I have four earning heads for leave encashment:
- Basic - PF deduction is applicable.
- HRA - PF deduction is not applicable.
- Conveyance - PF deduction is not applicable.
- Uniform Allowance - PF deduction is not applicable.
The limit of the maximum PF wage of 6500 is applicable.
Case 1: If an employee already has basic pay exceeding 6500, will PF be deducted on leave encashment? If yes, on which part will PF be deducted - only on basic or all heads?
Case 2: If an employee has basic pay less than 6500, will PF be deducted on leave encashment? If yes, on which part will PF be deducted - only on basic or all heads?
Case 3: If an employee gets an increment during the year, and the basic pay increases to 6501, how will PF be deducted? Will it consider the limit of EPS wage of 6500? What contributions from the employer side will be made in EPF and EPS?
Please help.
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I want help regarding PF deduction on leave encashment. I have the following case:
I have four earning heads for leave encashment:
- Basic - PF deduction is applicable.
- HRA - PF deduction is not applicable.
- Conveyance - PF deduction is not applicable.
- Uniform Allowance - PF deduction is not applicable.
The limit of the maximum PF wage of 6500 is applicable.
Case 1: If an employee already has basic pay exceeding 6500, will PF be deducted on leave encashment? If yes, on which part will PF be deducted - only on basic or all heads?
Case 2: If an employee has basic pay less than 6500, will PF be deducted on leave encashment? If yes, on which part will PF be deducted - only on basic or all heads?
Case 3: If an employee gets an increment during the year, and the basic pay increases to 6501, how will PF be deducted? Will it consider the limit of EPS wage of 6500? What contributions from the employer side will be made in EPF and EPS?
Please help.
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Hi,
There have been extensive discussions on the leave policy. Just do a quick search on the top left-hand side corner, type "leave policy," and you will see all the discussions with answers to your questions. I am sure this will answer your questions more accurately and quickly.
Regards,
Pooja
From India, Pune
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There have been extensive discussions on the leave policy. Just do a quick search on the top left-hand side corner, type "leave policy," and you will see all the discussions with answers to your questions. I am sure this will answer your questions more accurately and quickly.
Regards,
Pooja
From India, Pune
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Dear Manoj,
As you yourself have declared "Limit of Maximum PF wage 6500 is applicable," so in case number 1 and 3 the limit comes into force. It is very clear when a limit has been prescribed then beyond the limit is always discretionary. You can deduct and pay more subject to consent of the employee. In case number 3, if wages exceed the limit by way of increment in basic salary or by any other reason, again you can opt for deduction and deposit up to the basic salary of Rs. 6500.00.
In case number 2, if the salary is less than 6500 and if you are encashing leaves, then again you have to follow the limit principle. If it is within the limit, deduct as applicable and if otherwise, then again follow the limit principle.
In all cases, please try to understand the objective of the law and then act accordingly. This will help you in the future.
Regards,
Anil Anand
From India, New Delhi
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As you yourself have declared "Limit of Maximum PF wage 6500 is applicable," so in case number 1 and 3 the limit comes into force. It is very clear when a limit has been prescribed then beyond the limit is always discretionary. You can deduct and pay more subject to consent of the employee. In case number 3, if wages exceed the limit by way of increment in basic salary or by any other reason, again you can opt for deduction and deposit up to the basic salary of Rs. 6500.00.
In case number 2, if the salary is less than 6500 and if you are encashing leaves, then again you have to follow the limit principle. If it is within the limit, deduct as applicable and if otherwise, then again follow the limit principle.
In all cases, please try to understand the objective of the law and then act accordingly. This will help you in the future.
Regards,
Anil Anand
From India, New Delhi
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HR Leave Policy.doc
Statutory Compliance of a Industrial or Commercial Unit.xls
Statutory-compl iance.pdf