New Labour Laws: Companies to Pay Employees For Unused Leaves Exceeding 30 Days

The implementation of the remaining four labor codes is set to bring about major changes across a variety of sectors. Once these codes come into force, one notable provision will state that employees will not be able to accumulate more than 30 days of paid leave within a calendar year.

In cases where the number of leave days exceeds this limit, employers will be required to compensate employees for the excess leave.

As per the 'Occupational Safety, Health and Working Conditions Code,' which is one of the four labour laws, the term 'employee' in this context refers to individuals not occupying managerial or supervisory positions.

These four labour laws, namely the Occupational Safety, Health and Working Conditions Code, Code on Wages, Industrial Relations Code, and Social Security Code, have already been approved by Parliament and officially notified by the government. They are awaiting their effective implementation.

Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), outlines various conditions related to annual leave, carry-forward, and encashment. Section 32(vii) allows workers to carry forward annual leave to the subsequent calendar year, up to a maximum of 30 days. If, at the end of the calendar year, the annual leave balance surpasses 30 days, employees are entitled to encash the excess leave and carry forward 30 days to the next year, explained Sowmya Kumar, a partner at the law firm INDUSLAW, as reported by Economic Times.

Puneet Gupta, partner (people advisory services) at EY India, was also quoted in the ET report, stating, "According to the Occupational Safety, Health and Working Conditions Code, 2020, if the leave balance exceeds 30 days, the worker will be entitled to encash the excess leave. Such leave encashment will be carried out 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 organizations do not allow annual leave encashment, nor do they permit the paid leave balance to exceed the carry-forward limit."

It's important to note that the provisions concerning annual leave and leave encashment under the OSH Code apply exclusively to 'workers,' referring to employees who do not hold managerial, administrative, or supervisory roles.