Dear Seniors,
I have a query regarding the leave encashment policy. One of my friends left an organization a few months back. He had a certain number of leaves which he had not availed earlier. When he left the organization, his full and final settlement was done, but the leaves were not paid for. I just wanted to know if there is any legal way things could be settled, or please guide me on how to proceed in this matter to get the money from my previous organization.
It would be of great help.
Thanks in advance.
From India, Mumbai
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I have a query regarding the leave encashment policy. One of my friends left an organization a few months back. He had a certain number of leaves which he had not availed earlier. When he left the organization, his full and final settlement was done, but the leaves were not paid for. I just wanted to know if there is any legal way things could be settled, or please guide me on how to proceed in this matter to get the money from my previous organization.
It would be of great help.
Thanks in advance.
From India, Mumbai
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Kid,
Are we talking about you in trouble or your friend?
Please note, there could possibly be a condition that accrued leaves do not have any value in the Full & Final Settlement. Else, the accrued leaves in full or limited to n days (as agreed per company policy) should be paid in the Full & Final Settlement. i.e. Basic Pay is considered for encashment of the accrued leaves.
Regards, Lancy Menezes
From India, Mumbai
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4Are we talking about you in trouble or your friend?
Please note, there could possibly be a condition that accrued leaves do not have any value in the Full & Final Settlement. Else, the accrued leaves in full or limited to n days (as agreed per company policy) should be paid in the Full & Final Settlement. i.e. Basic Pay is considered for encashment of the accrued leaves.
Regards, Lancy Menezes
From India, Mumbai
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Hi,
Leave encashment policies vary from company to company. Therefore, only the company's HR department will be able to provide information on their specific policy. If they are processing the full and final settlement manually, there is a slight chance that they may have forgotten to include it.
Additionally, in some companies, if the employee is not confirmed, they may not receive leave encashment, or the company policy may dictate that leave encashment is not provided.
Regards,
Gunjan
From India, Delhi
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Leave encashment policies vary from company to company. Therefore, only the company's HR department will be able to provide information on their specific policy. If they are processing the full and final settlement manually, there is a slight chance that they may have forgotten to include it.
Additionally, in some companies, if the employee is not confirmed, they may not receive leave encashment, or the company policy may dictate that leave encashment is not provided.
Regards,
Gunjan
From India, Delhi
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Dear Naukid,
Leave policies vary from organization to organization. From a legal point of view, only AL/PL/EL will be encashed. It would be best to directly talk to your HR person regarding the same.
With Regards,
Vineet Deshmukh
From India, Yavatmal
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Leave policies vary from organization to organization. From a legal point of view, only AL/PL/EL will be encashed. It would be best to directly talk to your HR person regarding the same.
With Regards,
Vineet Deshmukh
From India, Yavatmal
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Leave encashment policy is not practiced by all organizations. Firstly, you need to find out whether the company follows this policy. If they have never introduced such a policy while your friend was a part of the company, and even while he was serving the notice period, or on his last day, he is not eligible to claim leave encashment.
Secondly, leaves are always allotted on a pro-rata basis. For example, if your company provides you with 24 leaves per year, that becomes 2 leaves per month. Depending on the month he resigned, the allowable leaves are to be calculated, and things are taken further. For instance, if your friend resigned on 1st March and his last working day, as per the 30 days notice, was 30th/31st March, in this case, your friend has only 2*3=6 allowable leaves. So if he has availed 6 leaves in that period, he has no balance leave to be encashed. If he exceeds 6 leaves, pay would be deducted.
From India, Mumbai
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Secondly, leaves are always allotted on a pro-rata basis. For example, if your company provides you with 24 leaves per year, that becomes 2 leaves per month. Depending on the month he resigned, the allowable leaves are to be calculated, and things are taken further. For instance, if your friend resigned on 1st March and his last working day, as per the 30 days notice, was 30th/31st March, in this case, your friend has only 2*3=6 allowable leaves. So if he has availed 6 leaves in that period, he has no balance leave to be encashed. If he exceeds 6 leaves, pay would be deducted.
From India, Mumbai
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Interesting that you start the post with your friend being denied leave, but you end by asking for help to get YOUR money back from the company.
Both as per the Factories Act and the Bombay Shop and Establishment Act, at termination or resignation, the outstanding leaves are required to be encashed along with full and final settlement. However, these will only cover the leaves specified by the company, such as the annual paid leave of 1 day for every 20 days worked in the case of a factory.
You can quote the relevant section of the Acts and ask the company to pay the balance. No contract or agreement between the company and the employee can override the legal provisions, so the company's provisions do not matter.
From India, Mumbai
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Both as per the Factories Act and the Bombay Shop and Establishment Act, at termination or resignation, the outstanding leaves are required to be encashed along with full and final settlement. However, these will only cover the leaves specified by the company, such as the annual paid leave of 1 day for every 20 days worked in the case of a factory.
You can quote the relevant section of the Acts and ask the company to pay the balance. No contract or agreement between the company and the employee can override the legal provisions, so the company's provisions do not matter.
From India, Mumbai
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Hello Sir,
Thank you for the enlightenment on -
It propelled me to study further and found the following, and have certain doubts and would be obliged if you could clear them.
As per Bombay Shops and Establishment Act, the leave policy states -
1) Leave:
a) Employees who have worked for at least 60 days in a year shall be entitled to not more than 5 days of leave (continuous or otherwise).
b) Employees who have worked for at least 240 days in a year shall be entitled to not more than 21 days of leaves (continuous or otherwise) and such leaves can be accumulated till a maximum of 42 days.
Note: Leaves allowed to an employee under the clauses (a) and (b) shall be inclusive of the days during the period of such leave on which a shop or commercial establishment remains closed.
Doubt 1:
If a person applies for leave on Sat and Mon, the Sun sandwiched between the two days shall be treated as leave and not a paid holiday.
Hence, in this case, we shall deduct 3 leaves and not 2.
Kindly correct me if I am wrong. Asking since someone objected to this practice but I found it is quite correct.
2) Separation:
If an employee entitled to leave under subsection (1) is discharged by his employer before he has been allowed the leave
OR
If having applied for and having been refused the leave, he quits his employment before he has been allowed the leave,
The employer shall pay him the amount payable under section 36 in respect of the leave.
Section 36: Pay During the Leave:
Every employee shall be paid for the period of his leave at a rate equivalent to the daily average of his wages for the days on which he actually worked during the preceding three months, exclusive of any earnings in respect of overtime.
Doubt 2:
For people who are getting wages (daily wages), it is advised that they ought to be paid only the wages, and no overtime compensation is to be considered.
However, are we to consider incentives if we are paying?
Doubt 3:
Secondly for salaried employees:
We have different components - Basic, DA, Medical, Conveyance, Food, HRA, etc.
If we look at it, Conveyance is the allowance paid to people for coming to the workplace. Are we to pay such a component on leave, or should we be paying only Basic + DA during such leaves, and other allowances should be calculated and paid only for the days worked in the month?
Doubt 4:
If a person is applying for a half-day and works only for 4 or 5 hours instead of a full shift, should the half-day leave be deducted and hence the wages and salary accordingly?
Doubt 5:
If the person has exhausted all his leaves, any further leaves that he takes would be leave without pay, and their wages/salary would be deducted against each day of leave.
In such a case, should we deduct their gross pay per day or just their basic + DA per day?
Doubt 6:
If the person is resigning and has leaves to his account which as per the rule should be encashed, then in such a scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves, or would it be calculated on a pro-rata basis depending on the number of months served?
2) Should we be compensating them on Basic + DA or on gross? As per the Pay during the leave, it is enough to pay Basic + DA so do the employers have any further obligations apart from basic + DA?
Thank you in advance for being patient and solving the query.
From India, Mumbai
Acknowledge(0)Amend(0)
Thank you for the enlightenment on -
It propelled me to study further and found the following, and have certain doubts and would be obliged if you could clear them.
As per Bombay Shops and Establishment Act, the leave policy states -
1) Leave:
a) Employees who have worked for at least 60 days in a year shall be entitled to not more than 5 days of leave (continuous or otherwise).
b) Employees who have worked for at least 240 days in a year shall be entitled to not more than 21 days of leaves (continuous or otherwise) and such leaves can be accumulated till a maximum of 42 days.
Note: Leaves allowed to an employee under the clauses (a) and (b) shall be inclusive of the days during the period of such leave on which a shop or commercial establishment remains closed.
Doubt 1:
If a person applies for leave on Sat and Mon, the Sun sandwiched between the two days shall be treated as leave and not a paid holiday.
Hence, in this case, we shall deduct 3 leaves and not 2.
Kindly correct me if I am wrong. Asking since someone objected to this practice but I found it is quite correct.
2) Separation:
If an employee entitled to leave under subsection (1) is discharged by his employer before he has been allowed the leave
OR
If having applied for and having been refused the leave, he quits his employment before he has been allowed the leave,
The employer shall pay him the amount payable under section 36 in respect of the leave.
Section 36: Pay During the Leave:
Every employee shall be paid for the period of his leave at a rate equivalent to the daily average of his wages for the days on which he actually worked during the preceding three months, exclusive of any earnings in respect of overtime.
Doubt 2:
For people who are getting wages (daily wages), it is advised that they ought to be paid only the wages, and no overtime compensation is to be considered.
However, are we to consider incentives if we are paying?
Doubt 3:
Secondly for salaried employees:
We have different components - Basic, DA, Medical, Conveyance, Food, HRA, etc.
If we look at it, Conveyance is the allowance paid to people for coming to the workplace. Are we to pay such a component on leave, or should we be paying only Basic + DA during such leaves, and other allowances should be calculated and paid only for the days worked in the month?
Doubt 4:
If a person is applying for a half-day and works only for 4 or 5 hours instead of a full shift, should the half-day leave be deducted and hence the wages and salary accordingly?
Doubt 5:
If the person has exhausted all his leaves, any further leaves that he takes would be leave without pay, and their wages/salary would be deducted against each day of leave.
In such a case, should we deduct their gross pay per day or just their basic + DA per day?
Doubt 6:
If the person is resigning and has leaves to his account which as per the rule should be encashed, then in such a scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves, or would it be calculated on a pro-rata basis depending on the number of months served?
2) Should we be compensating them on Basic + DA or on gross? As per the Pay during the leave, it is enough to pay Basic + DA so do the employers have any further obligations apart from basic + DA?
Thank you in advance for being patient and solving the query.
From India, Mumbai
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The leave policy is different with different organisations. The statutory rule is that any employee is entitled to a certain number of days of leave every year (sick leave, casual leave, and earned leave). There is no law to cover leave wages. In some organisations, to reduce absenteeism, they announce leave encashment. This may not be applicable in all organisations. Even if there is a policy, it is bound by certain restrictions. In your case, be happy that the company paid all your settlement dues. Leave encashment, even if a policy exists, is applicable for those in continuous service and is paid at the end of the year for those who did not avail the entitled leave but did not take it.
From India, Madras
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From India, Madras
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Taxability of leave encashment on resignation.doc