Dear All,
Request for clarification on the following –
1. As per Factories’ Act, Whether completion of 240 man days is compulsory to become eligible for earned leave?
2. Whether the paid leave availed in the previous year has to be taken into account only for the purpose of 240 days completion or to calculate the quantum of leave for present year?
3. Whether an employee who is working for more than 2 years is eligible for leave if his total man-days fall less than 240 days in a previous calendar year?
4. Whether the employee joined in the middle of the previous calendar year (say in October) is eligible for leave in succeeding calendar year?
5. Whether leave encashment has to be made for an employee who has joined and worked only for 5 to 6 months and resigns?
6. It is not mentioned either in the Factories' Act or in any other Acts as regard to calculation of leave encashment. Some of the views that in case of Monthly rated employees, to arrive at daily rate, monthly rate should be divided by 30 days. Some others view that Monthly rate should be divided by 26 days. Request someone to highlight the correct and justifiable procedure.
From India, Bangalore
27Request for clarification on the following –
1. As per Factories’ Act, Whether completion of 240 man days is compulsory to become eligible for earned leave?
2. Whether the paid leave availed in the previous year has to be taken into account only for the purpose of 240 days completion or to calculate the quantum of leave for present year?
3. Whether an employee who is working for more than 2 years is eligible for leave if his total man-days fall less than 240 days in a previous calendar year?
4. Whether the employee joined in the middle of the previous calendar year (say in October) is eligible for leave in succeeding calendar year?
5. Whether leave encashment has to be made for an employee who has joined and worked only for 5 to 6 months and resigns?
6. It is not mentioned either in the Factories' Act or in any other Acts as regard to calculation of leave encashment. Some of the views that in case of Monthly rated employees, to arrive at daily rate, monthly rate should be divided by 30 days. Some others view that Monthly rate should be divided by 26 days. Request someone to highlight the correct and justifiable procedure.
From India, Bangalore
Hi N. Mohan,
Answer to your queries are:
1. As per Factories’ Act, Whether completion of 240 man days is compulsory to become eligible for earned leave?
Yes, it is mandatory, but a company can extend leaves before completion of 240 days also if required as part of employee friendly policy.
2. Whether the paid leave availed in the previous year has to be taken into account only for the purpose of 240 days completion or to calculate the quantum of leave for present year?
Both, Paid leave to be considered for purpose of 240 days as well as quantum of leaves in kitty for the present year as well.
3. Whether an employee who is working for more than 2 years is eligible for leave if his total man-days fall less than 240 days in a previous calendar year?
As per the definition, 240 days working in a year is compulsory and if not done then it need to be completed in second year and then the leaves will be extended in third year.
4. Whether the employee joined in the middle of the previous calendar year (say in October) is eligible for leave in succeeding calendar year?
No. Need to go as per definition.
5. Whether leave encashment has to be made for an employee who has joined and worked only for 5 to 6 months and resigns?
Completion of 240 days in a year is required, and if not then not necessarily it is required to be encashed on exit.
6. It is not mentioned either in the Factories' Act or in any other Acts as regard to calculation of leave encashment. Some of the views that in case of Monthly rated employees, to arrive at daily rate, monthly rate should be divided by 30 days. Some others view that Monthly rate should be divided by 26 days. Request someone to highlight the correct and justifiable procedure.
See, for a monthly rated employee, it is always to be divided by the maximum number of days in the month. Yes it is not mentioned anywhere but it is widely accepted formula. If you do not follow this then the EPF and ESI contribution would not match as per compliance required for using denominator as max number of days in the month.
Your raised queries have referred me to an experience I had in one of my orgnaisation I worked for. The employer was very much interested on how not to extend earned leaves and make deduction by applying formal of 26 days division.
From India, New Delhi
Answer to your queries are:
1. As per Factories’ Act, Whether completion of 240 man days is compulsory to become eligible for earned leave?
Yes, it is mandatory, but a company can extend leaves before completion of 240 days also if required as part of employee friendly policy.
2. Whether the paid leave availed in the previous year has to be taken into account only for the purpose of 240 days completion or to calculate the quantum of leave for present year?
Both, Paid leave to be considered for purpose of 240 days as well as quantum of leaves in kitty for the present year as well.
3. Whether an employee who is working for more than 2 years is eligible for leave if his total man-days fall less than 240 days in a previous calendar year?
As per the definition, 240 days working in a year is compulsory and if not done then it need to be completed in second year and then the leaves will be extended in third year.
4. Whether the employee joined in the middle of the previous calendar year (say in October) is eligible for leave in succeeding calendar year?
No. Need to go as per definition.
5. Whether leave encashment has to be made for an employee who has joined and worked only for 5 to 6 months and resigns?
Completion of 240 days in a year is required, and if not then not necessarily it is required to be encashed on exit.
6. It is not mentioned either in the Factories' Act or in any other Acts as regard to calculation of leave encashment. Some of the views that in case of Monthly rated employees, to arrive at daily rate, monthly rate should be divided by 30 days. Some others view that Monthly rate should be divided by 26 days. Request someone to highlight the correct and justifiable procedure.
See, for a monthly rated employee, it is always to be divided by the maximum number of days in the month. Yes it is not mentioned anywhere but it is widely accepted formula. If you do not follow this then the EPF and ESI contribution would not match as per compliance required for using denominator as max number of days in the month.
Your raised queries have referred me to an experience I had in one of my orgnaisation I worked for. The employer was very much interested on how not to extend earned leaves and make deduction by applying formal of 26 days division.
From India, New Delhi
Lets be clear leave provision under the Act is normative; yyou can't go below. However if you, for example consider eligibility on 200 days or entitle 1 day leave for even 15 days worked.
Harpreet Walia has erred on answer to question #4; needs to check the provision.
To carry forward your example if an employee joins in October he will be eligible to leave if s/he works for 2/3 days from October-December. Suppose he completes 60 days out of 78 days then he will be entitled to 60/20 = 3 day leave. Why ratio of 2/3? As it is mentioned in the act & also 240/365 = 2/3.
Dividing by 26 or 30 will depend on how you calculate loss of pay leave or OT wages. You should follow the same principle for calculation of leave wages. There is no leave encashment as per the act; only payment of leave wages before employee proceeds on leave or at time of separation of service. However if you follow the practice of payment of leave wages, please do so on basis of gross wages to be legally correct.
From India, Mumbai
Harpreet Walia has erred on answer to question #4; needs to check the provision.
To carry forward your example if an employee joins in October he will be eligible to leave if s/he works for 2/3 days from October-December. Suppose he completes 60 days out of 78 days then he will be entitled to 60/20 = 3 day leave. Why ratio of 2/3? As it is mentioned in the act & also 240/365 = 2/3.
Dividing by 26 or 30 will depend on how you calculate loss of pay leave or OT wages. You should follow the same principle for calculation of leave wages. There is no leave encashment as per the act; only payment of leave wages before employee proceeds on leave or at time of separation of service. However if you follow the practice of payment of leave wages, please do so on basis of gross wages to be legally correct.
From India, Mumbai
Dear Mohan N
As per Factories’ Act, on completion of 240 man days employee is become eligible for earned leave @ 1day per 20 working. If an employee joins after 1st day of the calender year has to put 2/3 of avialable mandays working to eligible for leave @ 1day per 20 working. Besides, every establishment are having their own leave rule framed but can't provide less than the quantitiy santioned under the Act.
Each employee are being provided leave book,where leave earned and leave availed is entered. Further, the establishment also extend facility for accumulation of earned leave or encash if not availed as per the wish of the employee.
The employee is not eligible for any leave if fails to comply the norms of 240 days or 2/3 of avialble working days during each calender year. The employee is entitiled for leave encashment on his full & final settlement, provided fulfills the above criteria. If the person is daily rated calculation to be on 26 days or otherwise 3o days.
From India, Mumbai
As per Factories’ Act, on completion of 240 man days employee is become eligible for earned leave @ 1day per 20 working. If an employee joins after 1st day of the calender year has to put 2/3 of avialable mandays working to eligible for leave @ 1day per 20 working. Besides, every establishment are having their own leave rule framed but can't provide less than the quantitiy santioned under the Act.
Each employee are being provided leave book,where leave earned and leave availed is entered. Further, the establishment also extend facility for accumulation of earned leave or encash if not availed as per the wish of the employee.
The employee is not eligible for any leave if fails to comply the norms of 240 days or 2/3 of avialble working days during each calender year. The employee is entitiled for leave encashment on his full & final settlement, provided fulfills the above criteria. If the person is daily rated calculation to be on 26 days or otherwise 3o days.
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.
PF clarification on leave encashment.jpg
NO PF Contribution on Leave Encashment - SC judgment-Clarif ication by EPFO.pdf