Esteemed members of the group. I need your expert advice from a legal standpoint. I left my job within a year. Served the 90-day notice period. In the F&F statement, the company refused to encash the earned leaves citing the below reason. My only question to this esteemed forum is if the employer can refuse to encash earned leaves basis of the below rationale. Pls advise the action to be taken to resolve the issue.
"Leave encashment is available only to employees who complete a minimum of one year with the organization"
From India, New Delhi
"Leave encashment is available only to employees who complete a minimum of one year with the organization"
From India, New Delhi
It is true that earned leave (Leave earned as a privilege by working in the organisation for certain number of days) will get accrued only after twelve months of service. Therefore, an employee who has left the service before 12 months or before getting his EL credited to his account cannot demand encashment as a right. At the same time, some state rules will say that pro rata credit shall be given to employees who leave the organisation. But the legal interpretation is that "once you complete one year/ 12 months and get credit of EL and serve the organisation for a few months not necessarily 12 months again, and then leave the company, then the balance to your credit will be counted after considering the service after the first 12 months".
At the same time, if you have been granted EL in January, proportionately for the period of your service in the preceding year, then you can demand that EL to be encashed.
From India, Kannur
4193At the same time, if you have been granted EL in January, proportionately for the period of your service in the preceding year, then you can demand that EL to be encashed.
From India, Kannur
Madhu ji,
A couple of pointers to add to bring some more insights on the table:
1. Earned Leaves (9 in total) from Sep-Dec '22 period were granted in Jan '23 ---- hence these should be paid as per your note, is that correct?
2. Earned Leaves (24 in total) from Jan-Dec '23 period were accrued on January 1 itself ---- the employer HRIS portal showed that these leaves were actually accrued (under the head accrued) for an employee hence do you think the accrual itself provides right to an employee to claim the encashment of the same?
Pls suggest.
I have the screenshot of their HRIS portal to prove #2 i.e. 24 accrued leaves
From India, New Delhi
A couple of pointers to add to bring some more insights on the table:
1. Earned Leaves (9 in total) from Sep-Dec '22 period were granted in Jan '23 ---- hence these should be paid as per your note, is that correct?
2. Earned Leaves (24 in total) from Jan-Dec '23 period were accrued on January 1 itself ---- the employer HRIS portal showed that these leaves were actually accrued (under the head accrued) for an employee hence do you think the accrual itself provides right to an employee to claim the encashment of the same?
Pls suggest.
I have the screenshot of their HRIS portal to prove #2 i.e. 24 accrued leaves
From India, New Delhi
Can a company deny leave encashment?
On April 24, 2020, India’s Supreme Court said employers could only deduct leave encashment when it is paid, not due. This decision upheld the constitutionality of section 43B(f) of the Income Tax Act, 1961. (ITA).
it seems that your employer has stated that leave encashment is only available to employees who complete a minimum of one year with the organization.From a legal standpoint, the policy your employer has regarding leave encashment should be outlined in your employment contract, company policies, or the applicable labor laws of your jurisdiction. In many cases, companies have policies that specify when employees become eligible for leave encashment.
On April 24, 2020, India’s Supreme Court said employers could only deduct leave encashment when it is paid, not due. This decision upheld the constitutionality of section 43B(f) of the Income Tax Act, 1961. (ITA).
it seems that your employer has stated that leave encashment is only available to employees who complete a minimum of one year with the organization.From a legal standpoint, the policy your employer has regarding leave encashment should be outlined in your employment contract, company policies, or the applicable labor laws of your jurisdiction. In many cases, companies have policies that specify when employees become eligible for leave encashment.
If the leaves are credited to you, then on discharge from service, you can encash it. But encashment is becomes a right of an employee only when it is provided under the law. In your case, I doubt if it is more than what the law (Factories Act or Shops and Commercial Establishments Act) permits. As per Factories Act, the employees are entitled to one leave for every 20 days worked in the preceding year. If you had joined Sept 22, there would be 120 days of which you should have physically worked for 100 days and normally you would get 5 EL at the rate of one day for every 20 days worked. Again, if you have worked from January to August 2023, it would account for 200 physical working days which you give you 10 days' EL. If you had not utilised any EL, the maximum EL that you would get at the end of August would be 15 days. But you have said that you have 9+24 / 24 (?) right? That means the company has been giving leaves over and above what an employee is entitled to as per law. In that case, the provisions of the leave rules of the company should be followed.
From India, Kannur
From India, Kannur
Madhu ji,
My employer was providing Earned eaves as per the law only. Meaning, 2 leaves per month. Therefore for Sept-Dec '22 I got 9 leaves.
From Jan-Dec '23, I had 24... if we pro-rare till mid July... I earned around 13 leaves.
Therefore, even after considering pro-rared period... I had 9 (2022) +13 (2023) = 22 leaves eligible for encashment.
Do you advice me to initiate legal proceedings in this matter?
From India, New Delhi
My employer was providing Earned eaves as per the law only. Meaning, 2 leaves per month. Therefore for Sept-Dec '22 I got 9 leaves.
From Jan-Dec '23, I had 24... if we pro-rare till mid July... I earned around 13 leaves.
Therefore, even after considering pro-rared period... I had 9 (2022) +13 (2023) = 22 leaves eligible for encashment.
Do you advice me to initiate legal proceedings in this matter?
From India, New Delhi
As per no law, an employee could get two leaves per month. The maximum admissible leave per year shall be around 15 days. Therefore, the leave rules are not against the law but more favourable to the employees. As such, even if you take it legally, the maximum encashment would be for whatever I had posted just before this.
Remember that taking an employer to dispute redressal machiner and adjudication etc, would be bad for your career.
From India, Kannur
Remember that taking an employer to dispute redressal machiner and adjudication etc, would be bad for your career.
From India, Kannur
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
EPFO Circular Leave Encashment.jpg