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bagema (n/a)     25 October 2008

Leave Encashment under Labour law

Hi All

Can any one one tell me is there a provision for Leave encashment in Labour Law? IS it mandatory? If so what is the total entitlement?


 12 Replies

Sankaranarayanan (Advocate)     25 October 2008


see the bellow



The Act provides that every worker who has worked for a period of at least 240 days during a calendar year shall be allowed during the subsequent year leave with wages at the rate of (a) one day for every twenty days worked in the case of adults, and (b) one day for every fifteen days worked in the case of children. The leave is exclusive of holidays that occur during or at either end of the leave period. Provision is also made for proportionate leave with wages for a worker who is discharged or dismissed before he has rendered 240 days service. There is also a provision that any days of lay off by agreement or contract or as permissible under the Standing Orders; maternity leave period for female workers for days not exceeding 12 weeks and leave earned in the previous year in which leave is enjoyed may be counted as days on which workers have worked in a factory for the purpose of computation of period of 240 days or more

bagema (n/a)     25 October 2008

Hi Thanks

But it is only leave entitlement, but it says nothing of leave encashment or leave carry forward.

Anyone kindly help


H. S. Thukral (Lawyer)     25 October 2008

In my knowlege, the provision for encashment of leave can be only  through standing orders/contract of employment or by bilateral agreement between the workers and the employer. As such there is no law on that . Even accumulation of leave to an extent can be through above provisions otherwise leave would lapse if not availed.

Saravana Rajan   10 November 2008

Hello Experts,

Factories Act provides this encashment clearly in Chapter VIII. Pl find quote below from the act.[(3) If a worker is discharged or dismissed from service or quits his employment or is superannuated or dies while in service,during the course of the calendar year, he or his heir or nominee, as the case may be,shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before the discharge, dismissal, quitting of employment, superannuating or death calculated at the rates specified in sub-section (1),even if he had not worked for the entire period specified i sub- section(1) or sub-section(2) making him eligible to avail of such leave, and such payment shall be made-

  1. where the worker is discharged or dismissed or quits employment, before the expiry of the second working day from the date of such discharge, dismissal or quitting; and

  2. where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuating or death.

Hope this helps.

- Saravana Rajan


Rajadiraja (Advocate/consultant )     13 January 2010

Hi all,

I have a related query.  A Bank official has taken voluntary retirement and received all his retirement benefits such as PF, Gratuity, leave encashment, etc. Since it is his own earnings and for his livlihood, Whether his ex-wife or son can claim such amount.  Secondly, is he obligated to inform the details of such payouts received to the ex-wife upon her enquiry through her lawyer.  Please give me the exact views and the law in this regard and the sections and acts also. 

jagadish paranjape (Advocate)     16 January 2010

The benefits mentioned by you are self earned and personal property of the Bank official.Therefore niether his son nor  existing/ex wife have any right to demand details of the





Rajadiraja (Advocate/consultant )     17 January 2010

Thanks Mr.Jagadish.  But I would appreciate if you can tell me where this has been enacted as the same needs to be told to the court in the objections to be filed with authentication and case laws if any.   The magistrate might say what is wrong if you provide the details as requested by the petitioner.   The  ex bank official who is the respondent in this DV case does not want to disclose the details to the ex-wife who has filed a false DV case and is seeking this info for claiming maintenance and compensation for the child which she is keeping in her custody. Urgent pl. 

Namit (engineer)     20 November 2010


I have resigned from organization on 11 month of my joining date. I am serving a notice period of 2 months.
I am told by HR that PL is application only after 12 months of service but since I have put up my papers before 12 months I am not entitled for PL encashment. I have checked the company employee handbook for any such clause but couldnt find. Please advice what is correct and give me any reference to law that is applicable in this case. I work in Gurgaon in an engineering firm.

Thanks & Regards

Kirti Kar Tripathi (lawyer)     20 November 2010


In industrial law provisions of leave encashment is derived from  Factories Act and from Shop and commercial establishment Act. I the relevant provision is as follows

As per Section 79 of Factories Act 1948, it is enumerated that :- 
Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child. 

However there has been recent amendments in 2002 via The Small Enterprises( Employment Relations) Act 2002 which is applicable to whole of India. 

Under chapter IV - conditions of work , clause no 11 point 4 mentions that 

A worker shall be permitted to accumulate leave upto 45 days in addition to the leave entitlement of the current year earned on the basis of the work done by him in the previous year and he shall be entitled to encashment of entire accumulted earned leave including leave earned during the current year pro rata in case his services are terminated or he quits the service.

Where as in Shop and Commercial Establishment it is upto 45 days

Ananya (Not disclose)     07 December 2012

I have a query. Can leave encashment accrue to an employee year on year for unutilized leaves in UAE if the employee is still in service or is it only applicable when there is separation from the company that too only for the past 2 years?

Ananya (Not disclose)     07 December 2012

I have another query - is it mandatory in UAE to carry forward leaves or encash them. If company wants employee to utlize leaves can they lapse if utlilized by year end?

gaurav (Manager)     15 February 2013

Hi All, I have a urgent query... I have been working with my current organisation for the past nine years and have just put in my papers. I have a leave balance of around 80 days with me. The same have not been encashed by my organisation for the past three years.

As now I have put in my papers I am being told that as per the company policy I will be provided with only 15 days salary encashment.

I wish to know if is there any rules that can be used or applicable here.


Awaiting your further response.



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