Currently the earn leave encashment in our organisation is being on the last drawn basic. There has not been any ceiling on the accumulation so far. Some employees have more than 180 days.. !! We are about to curtail the accumuation upto 70 days. Also, the management now feels that the encashment on current basic basis strains the budget since the basic gets revised every 3 years on salary revision.
The management now wants that the leave encashment should be as follows :
- The PL balance at the end of the year, even though carried forward should attract encashment of the basic prevailing at that point of time only.
- While encashing at any point of time, the encashment should be based on the basic and the balance carried forward yearwise. E.g. if 20 days leave was the balance in 2005, and 20 days in 2006, while encashing, say 30 days in 2007, the same should be based on 20 days of 2005 basic and 10 days of 2006 basic. But not on the current (2007 basic)
I would like to know how the other companies deal with PL accumulation and encashment. Can the memebrs throw some light on this subject. I am particularly looking for the
a) maximum allowed PL accumulation
b) encashement basis
Shall appreciate your input.
With regards
K Venkat
From India, Mumbai
2The management now wants that the leave encashment should be as follows :
- The PL balance at the end of the year, even though carried forward should attract encashment of the basic prevailing at that point of time only.
- While encashing at any point of time, the encashment should be based on the basic and the balance carried forward yearwise. E.g. if 20 days leave was the balance in 2005, and 20 days in 2006, while encashing, say 30 days in 2007, the same should be based on 20 days of 2005 basic and 10 days of 2006 basic. But not on the current (2007 basic)
I would like to know how the other companies deal with PL accumulation and encashment. Can the memebrs throw some light on this subject. I am particularly looking for the
a) maximum allowed PL accumulation
b) encashement basis
Shall appreciate your input.
With regards
K Venkat
From India, Mumbai
Hi Sabari,
I would suggest even a easier way. Stop the practice of carrying forward of leaves. If the employee doesn't avail the leaves it will get lapsed at the end of the year.
There are two advantages to it.
1. The cost of leave encashment gets saved.
2. There will be hardly 5% employees who will be able to avail the total quota remaining will get lapsed.
3. As the leaves will gets lapsed at the end of the year, the employee will also consume the leaves. The purpose of leave facility is also solved.
All seniors correct me if I am wrong.
From India, Pune
I would suggest even a easier way. Stop the practice of carrying forward of leaves. If the employee doesn't avail the leaves it will get lapsed at the end of the year.
There are two advantages to it.
1. The cost of leave encashment gets saved.
2. There will be hardly 5% employees who will be able to avail the total quota remaining will get lapsed.
3. As the leaves will gets lapsed at the end of the year, the employee will also consume the leaves. The purpose of leave facility is also solved.
All seniors correct me if I am wrong.
From India, Pune
hi venkat
regarding leave encashment, you will have to frame a policy for encashment. in short, sick cannot be carry forwarded to the next year. and it will be lapsed if an employee accumulates during the year.
regarding PL, go by the policy, draft a policy such that the accumulated leave for an employee doesnt exceed more than 30 days in a year. i.e., an employee should have minimum 30 days leave to his credit. if he / she has more that the available credit. say 35 days, then only 5 days encashment need to be given to an employee.
therefore the budget strains of the mgmt gets reduced considerably. in this way, make a cut off leave thru a policy and proceed.
further doubt feel free to ask.
regards
r devarajan
From India, Madras
regarding leave encashment, you will have to frame a policy for encashment. in short, sick cannot be carry forwarded to the next year. and it will be lapsed if an employee accumulates during the year.
regarding PL, go by the policy, draft a policy such that the accumulated leave for an employee doesnt exceed more than 30 days in a year. i.e., an employee should have minimum 30 days leave to his credit. if he / she has more that the available credit. say 35 days, then only 5 days encashment need to be given to an employee.
therefore the budget strains of the mgmt gets reduced considerably. in this way, make a cut off leave thru a policy and proceed.
further doubt feel free to ask.
regards
r devarajan
From India, Madras
Hi,
The purpose why a Compnay allowed accumulation of leaves to its employees is two fold: one is to meet emergency situations when suddenly large number of leaves are required to be taken and second is to get some cash again in emergencies by getting some of the leaves encashed. Therefore, the suggestion that no encashment be allowed will not be in the interest of the employees. Another problem which will arise if no encashment is allowed is that employees will start taking all their leaves leading to absenteeism and Company's work will also suffer.
The Company's suggestion that leaves be encashed at the rate when the leaves were earned is also not fully correct. Suppose some of my accumulated leaves were earned by me in 2001. By accumulating leaves till 2007, have I not lost interest for six years and this loss has been a gain to the Company. So on one side Comapny gains interest on accumulated leaves, on the other hand it looses by encashing it at current rates. Moreover encashing Leaves at old rates will add to the workload of HR and Accounts people.
Therefore alternative is first do not allow 100% accumulation, i.e make the change in the rule that minimum 10 or 15 leaves shall have to be taken in a year and only balance shall be allowed to be carried forward as accumulated leaves. Second limit maximum accumulation to be allowed to 60 and say that beyond 60 theleaves will lapse.
K K Tyagi
From India, Delhi
The purpose why a Compnay allowed accumulation of leaves to its employees is two fold: one is to meet emergency situations when suddenly large number of leaves are required to be taken and second is to get some cash again in emergencies by getting some of the leaves encashed. Therefore, the suggestion that no encashment be allowed will not be in the interest of the employees. Another problem which will arise if no encashment is allowed is that employees will start taking all their leaves leading to absenteeism and Company's work will also suffer.
The Company's suggestion that leaves be encashed at the rate when the leaves were earned is also not fully correct. Suppose some of my accumulated leaves were earned by me in 2001. By accumulating leaves till 2007, have I not lost interest for six years and this loss has been a gain to the Company. So on one side Comapny gains interest on accumulated leaves, on the other hand it looses by encashing it at current rates. Moreover encashing Leaves at old rates will add to the workload of HR and Accounts people.
Therefore alternative is first do not allow 100% accumulation, i.e make the change in the rule that minimum 10 or 15 leaves shall have to be taken in a year and only balance shall be allowed to be carried forward as accumulated leaves. Second limit maximum accumulation to be allowed to 60 and say that beyond 60 theleaves will lapse.
K K Tyagi
From India, Delhi
Dear SV,
If we discuss about The factories Act 1948 wherein mentioned that leave can be accumunaled for 30 days(max) and in case of non granting of leave the limit of 30 days may be extended , generally acts are pro labour.
So in other cases the accumulation of leave may be min. 30 and max. depends on the policy of the company.
We are accumulating EL for 60 days, SL for 30 days and we give preference for encashment as because for encashment we have to pay at current rate of basic and the member avails his leave then he will be paid full rate.
As per social and natural justice, accumulation facilities should be there.
We can discuss the rest in the next session.
rrtpan
If we discuss about The factories Act 1948 wherein mentioned that leave can be accumunaled for 30 days(max) and in case of non granting of leave the limit of 30 days may be extended , generally acts are pro labour.
So in other cases the accumulation of leave may be min. 30 and max. depends on the policy of the company.
We are accumulating EL for 60 days, SL for 30 days and we give preference for encashment as because for encashment we have to pay at current rate of basic and the member avails his leave then he will be paid full rate.
As per social and natural justice, accumulation facilities should be there.
We can discuss the rest in the next session.
rrtpan
Thanks a lot Santosh, Devarajan, KKT and rrtpan for your suggestions and comments.
I am in line with KKT and rrtpan on the rationale behind the PL accumuation and encashment. I could convince the management about accumulation upto 70 days. The point for deliberation is now only on the basis of payment. While I advocate for the current basic pay (not the current gross pay), my MD is of the view that it should on the staggered basic pay relevant to the year in which a particular days are being carried forwarded. As KKT rightly pointed out, the latter practice will be an add-on headache to account for and administering the process. I also find the suggestion of not allowing 100% carry forward but to draw a limit. Tks for this inpur, KKT. Now.....
I seek your help to know whether any legal guideline exists on the rate of encashment.
With immense regards
K Venkat
From India, Mumbai
I am in line with KKT and rrtpan on the rationale behind the PL accumuation and encashment. I could convince the management about accumulation upto 70 days. The point for deliberation is now only on the basis of payment. While I advocate for the current basic pay (not the current gross pay), my MD is of the view that it should on the staggered basic pay relevant to the year in which a particular days are being carried forwarded. As KKT rightly pointed out, the latter practice will be an add-on headache to account for and administering the process. I also find the suggestion of not allowing 100% carry forward but to draw a limit. Tks for this inpur, KKT. Now.....
I seek your help to know whether any legal guideline exists on the rate of encashment.
With immense regards
K Venkat
From India, Mumbai
Dear Venkat,
First of all let me thank you and rrtpan for adding to my knowledge or being instrumental in adding to my knowledge. Before interacting with you both I was not aware about Factories Act providing for accumulation of leaves.
Coming back to your query I have checked the Factories Act and its Sections 78 to 80 provide that at the time of separation balance leaves including accumulated leaves are to be encashed at current rate (and not on staggered rate) of Basic Pay but it does not provide for encashment at request.
KKT
From India, Delhi
First of all let me thank you and rrtpan for adding to my knowledge or being instrumental in adding to my knowledge. Before interacting with you both I was not aware about Factories Act providing for accumulation of leaves.
Coming back to your query I have checked the Factories Act and its Sections 78 to 80 provide that at the time of separation balance leaves including accumulated leaves are to be encashed at current rate (and not on staggered rate) of Basic Pay but it does not provide for encashment at request.
KKT
From India, Delhi
Great.... Tks KKT. This is a great support for my representation to the mgmt. Once again, my sincere thanks to you all. Let us keep in touch. Hv a great day. Rgds. K Venkat
From India, Mumbai
From India, Mumbai
Hi All
Please help me in understanding the following; :?:
1. For shops and establishments, How many mandatory casual/earned/medical leaves an employer have to provide to employees.
2. Is there any mandatory requirement on earned leave accumulation.
3. Presently we are not bifurcating leaves between earned/medical and casual. If we have to do so in what proportion should we do so.
Rajesh
Please help me in understanding the following; :?:
1. For shops and establishments, How many mandatory casual/earned/medical leaves an employer have to provide to employees.
2. Is there any mandatory requirement on earned leave accumulation.
3. Presently we are not bifurcating leaves between earned/medical and casual. If we have to do so in what proportion should we do so.
Rajesh
hi
In my company we hav 30 days annual PL. A minimum of 15 days PL must be availed during every subsequent financial year. PL not availed to that extent will automatically lapse. Hence not more that 15 days can be accumulated in a year. Also there is a ceiling of 100 days. In addition to this PL accumulation beyond 30 days may be encashed by the employee in March or September. Many employees go in for this, so the problem of too many leaves to be encased at the end of their term with us also goes down.
your suggestion of encashing PL based on basic from that year sounds good but can be a little tricky .
Hope this is of some help to you.
:)
From India, New Delhi
In my company we hav 30 days annual PL. A minimum of 15 days PL must be availed during every subsequent financial year. PL not availed to that extent will automatically lapse. Hence not more that 15 days can be accumulated in a year. Also there is a ceiling of 100 days. In addition to this PL accumulation beyond 30 days may be encashed by the employee in March or September. Many employees go in for this, so the problem of too many leaves to be encased at the end of their term with us also goes down.
your suggestion of encashing PL based on basic from that year sounds good but can be a little tricky .
Hope this is of some help to you.
:)
From India, New Delhi
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
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