The four new labour laws (Codes) that are yet not implemented will bring a lot of changes including in leaves after being enforced.
According to the Occupational Safety, Health, and Working Conditions Code, an employee cannot accumulate more than 30 days of paid leave in a calendar year.
In case, the accumulated paid leave exceeds 30 days in a calendar year, the company will have to pay for the excess leave.
What is Leave Encashment?
The labour law is structured in such a manner that every salaried person is entitled to a minimum number of paid leave every year.
However, an individual employee doesn’t need to utilize all the leave he is entitled to in a year. Most employers allow the employees an option of carrying forward such unutilised paid leaves.
This would invariably leave the employee with an accumulated unutilised leave balance at the time of retirement or resignation from the company, as the case may be. This compels the employer to compensate the unutilised paid leave of the employees.
The company permits an employee can avail of earned leaves with prior notice to the authority. These leaves become eligible for encashment after a specific period. This policy varies from one organisation to another.
In case the labour laws are implemented in that case if the accumulated paid leave due to an employee exceeds 30 days in a calendar year, the company (employer) will have to pay for the excess leave.
Puneet Gupta, Partner, People Advisory Services, EY India, says, “As per the Occupational Safety, Health, and Working Conditions Code, 2020 if the leave balance exceeds 30, the worker will be entitled to encash the excess leave.”
“Such leave encashment will be done at the end of each calendar year. The annual leave for workers cannot lapse under the labour codes and will have to be availed or carried forward or encashed”, Puneet Gupta added.
“Currently, many organisations do not allow leave encashment on an annual basis as well as for the paid leave balance to exceed the carry forward limit”, Puneet Gupta further said.
“It is important to note that provisions relating to annual leave and leave encashment under the OSH Code are applicable only for ‘workers’ – that is, employees who are not in managerial or administrative or supervisory roles”, Puneet Gupta said.
