Dear Seniors, I had 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. Just wanted to know if we have 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
It would be of great help
Thanks in advance
From India, Mumbai
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 en-cashment of the accrued leaves.
Regards,
Lancy Menezes
From India, Mumbai
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 en-cashment of the accrued leaves.
Regards,
Lancy Menezes
From India, Mumbai
Hi,
Leave encashment policy vary from company to company.So,that company HR will only be able to tell that whats their policy.If they are doing f&f settlement manually then there is little bit chances that may be they have forgot to add.
Also, In some companies if the employee is not confirmed then too they don't use to give leave encashment or if there company policy is not to pay.
Regards
Gunjan
From India, Delhi
Leave encashment policy vary from company to company.So,that company HR will only be able to tell that whats their policy.If they are doing f&f settlement manually then there is little bit chances that may be they have forgot to add.
Also, In some companies if the employee is not confirmed then too they don't use to give leave encashment or if there company policy is not to pay.
Regards
Gunjan
From India, Delhi
Dear Naukid,
Leave policy are vary from organization to organization. If we considered legal point of view only AL/PL/EL will be en cashed. Better way you can directly talk to your HR person regarding the same.
With Regards,
Vineet Deshmukh
From India, Yavatmal
Leave policy are vary from organization to organization. If we considered legal point of view only AL/PL/EL will be en cashed. Better way you can directly talk to your HR person regarding the same.
With Regards,
Vineet Deshmukh
From India, Yavatmal
Leave encashment policy is not practised by all the organizations.
Firstly you need to find out if or not the company follows this policy.
If they have never introduced such policy whilst your friend was a part of the company, and even while he was serving the notice period, even when he was serving his last day, he is not eligible to claim leave encash.
Secondly, Leaves are always alloted on pro-rata basis. So say for example your company provides you 24 leaves pa which becomes 2 leaves per month. Depending on the month he resigned, the allowable leaves are to be calculated and accordingly things are taken further.
Say for example your friend resigned on 1st Mar and his last working day as per 30 days notice was 30/31 Mar.
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
Firstly you need to find out if or not the company follows this policy.
If they have never introduced such policy whilst your friend was a part of the company, and even while he was serving the notice period, even when he was serving his last day, he is not eligible to claim leave encash.
Secondly, Leaves are always alloted on pro-rata basis. So say for example your company provides you 24 leaves pa which becomes 2 leaves per month. Depending on the month he resigned, the allowable leaves are to be calculated and accordingly things are taken further.
Say for example your friend resigned on 1st Mar and his last working day as per 30 days notice was 30/31 Mar.
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
Interesting that you start the post with your friend being denied leave but you end asking for help to get YOUR money back from the company.
Both as per factories act and Bombay shop and establishment act, at termination / 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. So, it covers the annual paid leave of 1 day for every 20 worked in case of a factory
You can quote the section of the relevant act and ask the company to pay the balance.
No contract or agreement between the company and the employee can over ride the legal provisions, so your company provisions do not matter
From India, Mumbai
Both as per factories act and Bombay shop and establishment act, at termination / 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. So, it covers the annual paid leave of 1 day for every 20 worked in case of a factory
You can quote the section of the relevant act and ask the company to pay the balance.
No contract or agreement between the company and the employee can over ride the legal provisions, so your company provisions do not matter
From India, Mumbai
Hello SIr,
Thank you for the enlightenment on -
It propelled me to study further and found the foll 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 atleast 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 atleast 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 max 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 a leave on Sat and Mon, The Sun sandwiched between the two days shall be treated as a 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 this practice but I found it is quite correct.
2) Separation:
If an employee entitled to leave under sub section (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 preceeding 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 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 workplace. Are we to pay such component on the 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 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 a leave without pay and their wages/salary would be deducted against each day of leave.
In such 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 scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves or it would be calculated on 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 employer have any further obligations apart from basic + da?
Thank you in advance for being patient and solving the query.
From India, Mumbai
Thank you for the enlightenment on -
It propelled me to study further and found the foll 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 atleast 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 atleast 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 max 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 a leave on Sat and Mon, The Sun sandwiched between the two days shall be treated as a 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 this practice but I found it is quite correct.
2) Separation:
If an employee entitled to leave under sub section (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 preceeding 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 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 workplace. Are we to pay such component on the 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 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 a leave without pay and their wages/salary would be deducted against each day of leave.
In such 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 scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves or it would be calculated on 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 employer have any further obligations apart from basic + da?
Thank you in advance for being patient and solving the query.
From India, Mumbai
The leave policy is different with different organsation. The statutory thing is that the any employee is entitled to so many days of leave every year ( sick leave, casual leave and earned leave). There is no law to cover the leave wages. In some organisation to reduce absenteeism they announce leave encashment. this will not be necessarily in all the organsation. Even if there is a policy it is boundby certain restrictions. In your case feel happy that the company paid all your settlement dues. Leave encashment even if a policy is there it is applicable for those in continuous service and it is paid at he end of the year for those who did not avail the leave entitled for them but not availed.
From India, Madras
From India, Madras
Sandwich rule applies in most companies.
So deducting 3 days is correct. The note above explains it perfectly
Leave wages under this act is at average gross wage rate.
In order to compute that, you need to take his gross pay excluding overtime paid for last 3 months and divide by number of days worked (including days of approved paid leave and holidays but excluding weekly off). I think incentives are to be included. Only overtime is excluded
The quote in your previous doubt makes it very clear that you have to pay on gross basis, including all allowances.
Yes, it should be done. Deduct half day. There is no concept of quarter day.
Gross makes sense in this case
QUOTE=shah01ankita;2057445]
Doubt 6:
If the person is resigning and has leaves to his account which as per the rule should be encashed, then in such scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves or it would be calculated on 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 employer have any further obligations apart from basic + da?
Thank you in advance for being patient and solving the query.[/QUOTE]
From India, Mumbai
So deducting 3 days is correct. The note above explains it perfectly
Leave wages under this act is at average gross wage rate.
In order to compute that, you need to take his gross pay excluding overtime paid for last 3 months and divide by number of days worked (including days of approved paid leave and holidays but excluding weekly off). I think incentives are to be included. Only overtime is excluded
The quote in your previous doubt makes it very clear that you have to pay on gross basis, including all allowances.
Yes, it should be done. Deduct half day. There is no concept of quarter day.
Gross makes sense in this case
QUOTE=shah01ankita;2057445]
Doubt 6:
If the person is resigning and has leaves to his account which as per the rule should be encashed, then in such scenario -
1) For the current year of service, how many leaves should the person be eligible for encashment? Full 21 days' leaves or it would be calculated on 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 employer have any further obligations apart from basic + da?
Thank you in advance for being patient and solving the query.[/QUOTE]
From India, Mumbai
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Taxability of leave encashment on resignation.doc