Hi Team,
We are a manufacturing company based in Tamil Nadu, with over 200 employees. Our workdays consist of 6 days a week with rotational shifts. Currently, we provide our employees with 2 days of paid leave per month and 12 days of national and festival holidays. Our management is now looking to establish a leave policy that includes Casual Leave, Sick Leave, and Earned Leave for the benefit of our employees.
I would like clarification on how to align the leave policy with the Factory Act, Wage Act, or any other relevant legislation pertaining to our company. Please provide guidance or share a sample draft policy if available.
Thank you.
From India, Tirupur
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We are a manufacturing company based in Tamil Nadu, with over 200 employees. Our workdays consist of 6 days a week with rotational shifts. Currently, we provide our employees with 2 days of paid leave per month and 12 days of national and festival holidays. Our management is now looking to establish a leave policy that includes Casual Leave, Sick Leave, and Earned Leave for the benefit of our employees.
I would like clarification on how to align the leave policy with the Factory Act, Wage Act, or any other relevant legislation pertaining to our company. Please provide guidance or share a sample draft policy if available.
Thank you.
From India, Tirupur
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As the organization is a factory, the leave rule will be under the Factories Act. According to the Factories Act, it is Annual Leave. For any adult worker, it is 1 day for 20 days of actual presence. The eligibility criteria are 240 days of work in the calendar year, inclusive of annual leave enjoyed in the previous year, etc. However, leave earned will be based on the actual present days.
Currently, the organization provides 2 days of annual leave per month, totaling 24 days in a year, which exceeds the statutory limit. If the organization can afford it, it may continue, but eligibility criteria should be in place to control absenteeism. Festival holidays already amount to 12 days in a year, which, in my opinion, is reasonable.
Casual leave may be 6 days in a year, and medical leave, if covered under ESI as per the ESIC scheme or out of the purview of ESI, may be 12 days in a year.
There should not be any leave accumulation for casual leave. For annual leave, it may be as per the Factories Act, and sick leave accumulation may be 24 days.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
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409Currently, the organization provides 2 days of annual leave per month, totaling 24 days in a year, which exceeds the statutory limit. If the organization can afford it, it may continue, but eligibility criteria should be in place to control absenteeism. Festival holidays already amount to 12 days in a year, which, in my opinion, is reasonable.
Casual leave may be 6 days in a year, and medical leave, if covered under ESI as per the ESIC scheme or out of the purview of ESI, may be 12 days in a year.
There should not be any leave accumulation for casual leave. For annual leave, it may be as per the Factories Act, and sick leave accumulation may be 24 days.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
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Leave Policy for Employees: Factories Act
The Factories Act of 1948 stipulates that each worker or employee who has worked at least 240 days in a calendar year is entitled to 12 working days of paid leave or annual leave (generally known as Earned Leave or Privilege Leave). For adult and juvenile employees, paid or earned leave duration varies (under the age of 15 years).
A juvenile employee under the age of 15 is eligible for a compensated or earned leave of one day following completing 15 working days. An adult employee, however, is eligible for this leave only after 20 days of employment. For an adult worker and a child worker, the leave period is reckoned for 20 and 15 working days.
Employees receive their regular daily pay during the term of earned leave. As a result, the employee is entitled to receive daily pay throughout the yearly leave period. Employees' full-time daily compensation, excluding incentives and overtime, is their daily pay. However, it includes all other perks, such as dearness allowances and cash equivalents from the sale of food items and other items to the employee.
Earned (Privileged) Leave
Earned leave, or privileged leave, is accumulated based on the number of days an employee works. The amount of earned leave varies by region. Unlike sick and casual leave, earned leave can be carried over to the next year, though there is a limit on accumulation. Some organizations also allow employees to cash in their earned leave.
In addition to these common leave types, many organizations now offer special leaves like anniversary leave, birthday leave, and mental health leave to better meet the needs of their employees.
Other leave types
In addition to the standard leave types, some organizations offer additional leave options as extra benefits for their employees:
Marriage Leave
For employees getting married, many organizations provide marriage leave, ranging from a minimum of three days to a maximum of two weeks. The exact number of days varies by organization.
Compensatory Leave
Compensatory leave is offered to employees who work overtime or on non-working days such as weekends and holidays. These employees can take time off during regular weekdays to compensate for the extra hours worked.
Loss-of-Pay Leave
Organizations may allow employees to take leave even after exhausting their allotted leave balance. These extra days off are unpaid and are known as loss-of-pay (LOP) leaves.
These additional leave options, though not mandated by law, help cater to the diverse needs and circumstances of employees, promoting a more flexible and supportive work environment.
Sick Leave
Sick leave allows employees to rest and recover when they are ill or injured. Most organizations provide a minimum of 12 sick leaves per year, which are credited at the start of the year. These leaves usually cannot be carried over to the next year or encashed.
Casual (Planned) Leave:
Casual leave, commonly 12 days for a year, lets employees take time off for regular vacations or personal responsibilities, exigencies, like attending important events. Some organizations provide all casual leaves at the beginning of the year, while others distribute them monthly, either proportionately or in full.
Maternity Leave for Female Employees:
Maternity leave is a mandatory benefit that allows mothers to take 26 weeks of paid leave for their first and second children. For subsequent children, they are entitled to 12 weeks of leave. This leave helps mothers recover from childbirth and care for their newborns. To be eligible, women must have worked at least 80 days in the 12 months before their expected delivery date.
Under this category, "Paternity leave" for male spouses is also being introduced in some establishments in India.
Leave Rules
After identifying the types of leave available, it’s essential to establish clear rules for each type:
Grant/Entitlement
Define the amount of leave granted, how frequently it can be taken, and specific timing requirements.
Availing Rules
Set guidelines on how often an employee can take a particular leave, including any limits or restrictions.
Eligibility
Determine who qualifies for each type of leave based on factors like job role and tenure.
Approvals
Specify who can approve leave requests and any approval limits.
Clubbing & Covering
Establish rules for how leave interacts with weekends or holidays that fall within the leave period.
Encashment
Identify which types of leave can be converted to cash, the limits on encashment, and the salary components used for this calculation.
Year-End Activity
Define policies for carrying forward unused leave, any maximum limits, and handling lapses.
For specific leaves like Sick Leave and Maternity Leave, ensure all required documentation is collected and maintained by HR. These decisions should align with the organization’s unique needs and culture, providing a structured yet flexible leave policy for employees.
Rules For Granting Leaves
When establishing rules for granting leaves, consider the following aspects:
Amount of Leave
Decide the total number of leave days an employee can take in a year.
Frequency of Granting
Determine how often leave is allocated, whether monthly, quarterly, or annually.
Expiry Period
Set a time frame within which the granted leave must be used before it expires.
Eligibility
Define which employees qualify for the leave based on their role, tenure, or other criteria.
Top-Up Leave Grants
Establish rules for adding extra leave days beyond the standard allocation.
Prorating
Determine how to adjust leave entitlement for employees who join or leave the organization mid-year.
What Is a Good Leave Policy
A good leave policy is your rulebook for paid time off. It should be clear, easy to understand, and fair for both you and your employees. Here’s what makes a great leave policy for employees:
Organised and Up-to-Date: Think of it like a well-maintained recipe book. It should have clear sections, page numbers, and a title for easy reference. The policy should also be dated and have a revision history to show any updates.
Crystal Clear Language: Leave jargon at the door. Use plain English that everyone can understand. Define any specific terms used in the policy to avoid confusion.
Mobile-Friendly and Accessible: These days, employees need access to information on the go. Make sure your leave policy is available online and optimized for mobile devices.
Bilingual Power: If your company has a large number of employees who speak a different language, offer the policy in both English and the local language. This ensures clear communication and avoids misunderstandings.
Two-Way Street: A good leave policy protects both the company and its employees. It should outline procedures for requesting leave, what qualifies for paid time off, and how employees should stay reachable during their absence.
Regular Check-Ups: Just like your health, your leave policy needs regular reviews. Schedule updates every two years or so to ensure it aligns with current company needs and legal requirements.
From India, Bangalore
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The Factories Act of 1948 stipulates that each worker or employee who has worked at least 240 days in a calendar year is entitled to 12 working days of paid leave or annual leave (generally known as Earned Leave or Privilege Leave). For adult and juvenile employees, paid or earned leave duration varies (under the age of 15 years).
A juvenile employee under the age of 15 is eligible for a compensated or earned leave of one day following completing 15 working days. An adult employee, however, is eligible for this leave only after 20 days of employment. For an adult worker and a child worker, the leave period is reckoned for 20 and 15 working days.
Employees receive their regular daily pay during the term of earned leave. As a result, the employee is entitled to receive daily pay throughout the yearly leave period. Employees' full-time daily compensation, excluding incentives and overtime, is their daily pay. However, it includes all other perks, such as dearness allowances and cash equivalents from the sale of food items and other items to the employee.
Earned (Privileged) Leave
Earned leave, or privileged leave, is accumulated based on the number of days an employee works. The amount of earned leave varies by region. Unlike sick and casual leave, earned leave can be carried over to the next year, though there is a limit on accumulation. Some organizations also allow employees to cash in their earned leave.
In addition to these common leave types, many organizations now offer special leaves like anniversary leave, birthday leave, and mental health leave to better meet the needs of their employees.
Other leave types
In addition to the standard leave types, some organizations offer additional leave options as extra benefits for their employees:
Marriage Leave
For employees getting married, many organizations provide marriage leave, ranging from a minimum of three days to a maximum of two weeks. The exact number of days varies by organization.
Compensatory Leave
Compensatory leave is offered to employees who work overtime or on non-working days such as weekends and holidays. These employees can take time off during regular weekdays to compensate for the extra hours worked.
Loss-of-Pay Leave
Organizations may allow employees to take leave even after exhausting their allotted leave balance. These extra days off are unpaid and are known as loss-of-pay (LOP) leaves.
These additional leave options, though not mandated by law, help cater to the diverse needs and circumstances of employees, promoting a more flexible and supportive work environment.
Sick Leave
Sick leave allows employees to rest and recover when they are ill or injured. Most organizations provide a minimum of 12 sick leaves per year, which are credited at the start of the year. These leaves usually cannot be carried over to the next year or encashed.
Casual (Planned) Leave:
Casual leave, commonly 12 days for a year, lets employees take time off for regular vacations or personal responsibilities, exigencies, like attending important events. Some organizations provide all casual leaves at the beginning of the year, while others distribute them monthly, either proportionately or in full.
Maternity Leave for Female Employees:
Maternity leave is a mandatory benefit that allows mothers to take 26 weeks of paid leave for their first and second children. For subsequent children, they are entitled to 12 weeks of leave. This leave helps mothers recover from childbirth and care for their newborns. To be eligible, women must have worked at least 80 days in the 12 months before their expected delivery date.
Under this category, "Paternity leave" for male spouses is also being introduced in some establishments in India.
Leave Rules
After identifying the types of leave available, it’s essential to establish clear rules for each type:
Grant/Entitlement
Define the amount of leave granted, how frequently it can be taken, and specific timing requirements.
Availing Rules
Set guidelines on how often an employee can take a particular leave, including any limits or restrictions.
Eligibility
Determine who qualifies for each type of leave based on factors like job role and tenure.
Approvals
Specify who can approve leave requests and any approval limits.
Clubbing & Covering
Establish rules for how leave interacts with weekends or holidays that fall within the leave period.
Encashment
Identify which types of leave can be converted to cash, the limits on encashment, and the salary components used for this calculation.
Year-End Activity
Define policies for carrying forward unused leave, any maximum limits, and handling lapses.
For specific leaves like Sick Leave and Maternity Leave, ensure all required documentation is collected and maintained by HR. These decisions should align with the organization’s unique needs and culture, providing a structured yet flexible leave policy for employees.
Rules For Granting Leaves
When establishing rules for granting leaves, consider the following aspects:
Amount of Leave
Decide the total number of leave days an employee can take in a year.
Frequency of Granting
Determine how often leave is allocated, whether monthly, quarterly, or annually.
Expiry Period
Set a time frame within which the granted leave must be used before it expires.
Eligibility
Define which employees qualify for the leave based on their role, tenure, or other criteria.
Top-Up Leave Grants
Establish rules for adding extra leave days beyond the standard allocation.
Prorating
Determine how to adjust leave entitlement for employees who join or leave the organization mid-year.
What Is a Good Leave Policy
A good leave policy is your rulebook for paid time off. It should be clear, easy to understand, and fair for both you and your employees. Here’s what makes a great leave policy for employees:
Organised and Up-to-Date: Think of it like a well-maintained recipe book. It should have clear sections, page numbers, and a title for easy reference. The policy should also be dated and have a revision history to show any updates.
Crystal Clear Language: Leave jargon at the door. Use plain English that everyone can understand. Define any specific terms used in the policy to avoid confusion.
Mobile-Friendly and Accessible: These days, employees need access to information on the go. Make sure your leave policy is available online and optimized for mobile devices.
Bilingual Power: If your company has a large number of employees who speak a different language, offer the policy in both English and the local language. This ensures clear communication and avoids misunderstandings.
Two-Way Street: A good leave policy protects both the company and its employees. It should outline procedures for requesting leave, what qualifies for paid time off, and how employees should stay reachable during their absence.
Regular Check-Ups: Just like your health, your leave policy needs regular reviews. Schedule updates every two years or so to ensure it aligns with current company needs and legal requirements.
From India, Bangalore
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Please also check Standing Orders (Model and Certified).
The standing orders often have requirements of SL, CL, apart from PL specified in the Factories Act.
I think you are providing better leave than required directly under the Factories Act, so there is no legal restriction. Your management is being labor-friendly by giving more options. But please remember that you may also need good change management to explain the changes lest they be misinterpreted.
From India, Mumbai
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The standing orders often have requirements of SL, CL, apart from PL specified in the Factories Act.
I think you are providing better leave than required directly under the Factories Act, so there is no legal restriction. Your management is being labor-friendly by giving more options. But please remember that you may also need good change management to explain the changes lest they be misinterpreted.
From India, Mumbai
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