New Labour Laws: Companies Need To Pay Employees In Case of More Than 30 Unused Leaves

The four labour laws that are yet to be implemented will bring major changes in multiple areas. Once the laws become effective, among other rules, employees cannot accumulate more than 30 days of paid leaves in a calendar year. In case the leaves are more than 30 days, the company or employer will need to pay for the excess leave to the employee.

According to the ‘Occupational Safety, Health and Working Conditions Code’ — one of the 4 labour laws, ’employee’ in this case means those who are not in managerial or supervisory roles.

The four labour laws — Occupational Safety, Health and Working Conditions Code; Code on Wages; Industrial Relations Code; and Social Security Code — have already been passed by Parliament and notified by the government. They only await the effective date.

“Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), has a number of conditions with respect to availing annual leave, carry forward and encashment. Section 32(vii) allows a worker to carry forward annual leave to a subsequent calendar year, up to a maximum of 30 days. In case at the end of the calendar year the annual leave balance exceeds 30, then the employee will be entitled to encash the excess leave and carry forward 30 days to the next year,” Sowmya Kumar, partner at law firm INDUSLAW, said, according to an Economic Times report.

The ET report also quoted Puneet Gupta, partner (people advisory services) at EY India, as saying, “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. 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.”

He added that 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.