Leave In Establishments Covered under the Factories Act

Leave Policy

Leave policy, a matter of interest for employees and often prerogative for employers. It is often a question for clarifications for both when it comes to the number of days the leave of absence an employee is rightly entitled which an employer is obliged to give and duly prescribe well within the sphere of law in leave policy.  Every state has its own Shops and Establishments Act which basically includes amendments and laws relating to :

• the regulation of working hours,
• payment of wages,
• leave or holiday
• the terms of services and
• any other conditions of work for people working in various establishments.

These rules apply to people employed in:

• shops
• commercial establishments
• establishments for public entertainment or amusement and
• other establishments.

The workers employed in factories are subjected to the provisions prescribed under section 79 of the Factories Act, 1948.

The Shops and Establishments Act (hereafter ‘the Act) was enacted by every State in India for the purpose of regulation of work and employment conditions in shops and various commercial establishments prescribed under respective state enactments. The Act principally regulates –

• Condition of employment;
• Payment of wages;
• Hours of work;
• Opening and closing hours;
• Interval for rest;
• Overtime work;
• Leave (annual, sick & casual) etc.

The employer is obligated to follow the minimum measures and conditions prescribed under its respective State Act and the employee is entitled to such rights that are available to exercise.

Types of Leave of Absence

The leave of absence available to exercise by an employee is classified under three common types consistently by all States, viz. –

Annual leave

This is also known/recognized as Privileged leave or Earned leave. These are the paid leaves an employee can AVAIL for a longer duration or can CARRY FORWARD to the succeeding year or ENCASH it. In situations wherein the employee runs short of sick leave subject to policies of the employer, this leave can be clubbed to meet up the requirement of leave. In general, the employee has to plan such leaves and inform the employer in advance or regulate after resuming work by fulfilling the process as prescribed by the employer.

The Act makes no mention with regard to the maximum number of earned leave, which may be accumulated by a worker. The Act, however, provides a threshold limit on the number of accumulated earned leaves, which can be carried forward to next calendar year.

If a worker does not avail the whole of the earned leave allowed to him in a particular calendar year, the balance of leave not taken by him will stand accumulated to his credit at the end of the year. Though there is no limit to such accumulation, the maximum number of days of such accumulated leave, which is permissible to be carried forward to the succeeding year is 30 days, in case of an adult and 40 days, in case of a child. Any un-availed leave, in excess of the carry forward limits, lapse at the end of the year.  Interestingly, in case a worker has applied for this leave but has not been granted, the leave refused is permissible to be carried forward to the subsequent year, without any limit.

Casual leave

These are the paid leaves that can be availed for personal reasons by an employee wherein the leave of absence required is for one or two days. Many employers prescribe a maximum of three days casual leave in continuity in a month as general practice and may stipulate conditions restraining in the context of clubbing the casual leaves along with weekend off or holiday(s) to prevent a long leave duration. The employee has to plan such leaves and inform the employer in advance or regulate after resuming work by fulfilling the process as prescribed by the employer. These leaves CANNOT BE CARRIED FORWARD nor is ENCASHABLE. This leave cannot be clubbed with annual leave however, in situations where an employee runs short of sick leave, can utilize this subject to the policies prescribed by the employer. However, some employers have shifted the paradigm towards transfer/conversion of unused casual leaves to annual leave at the end of the year.

Maternity leave – regulated under the Maternity Benefit Act

This is the paid leave benefit available to pregnant women working in an establishment and is applicable as prescribed under Maternity Benefit Act, 1961. These are the leaves available to an employee in the course of employment other than the general State Holidays and Days off declared by the employer and a minimum number of such holidays to be allowed is also prescribed under the Act. Generally, the States follow Calendar Year to consider for aforesaid leaves i.e. from the month of January to December every year, however, some States have prescribed otherwise.

Leave benefit Rules for Workers 

• The worker employed in a factory for 240 days or more in a calendar year is entitled to avail annual leave which is calculated in case of an adult worker, as 1-day leave for every 20 days worked in the previous year and in the case of child worker, as 1 day leaves for every 15 days worked in the previous year. For example, if the total number of days worked in the previous year is 260 then a worker is entitled to 13 days of annual leave.
• The worker has to apply for such leave with a minimum of 15 days’ notice to the employer and this leave cannot be availed more than 3 times a year.
• The unused leave can be carried forward to next year which in the case of adult worker shall not exceed more than 30 days and in case of child, the worker shall not exceed more than 40 days.
• Calculation of paid leave will be on basic wages and DA.
• The worker if applying for leave and such leave is not allowed, the refused leave shall be allowed to carry forward without any limit.
• In situations of worker quitting or terminated from employment, the unused annual leave should be paid to the worker and in case of death of worker to be paid to the nominee as prescribed under the Act.
• The Factory manager should maintain a leave register to record leave for each worker.
• This leave can be encashed when the worker quits employment or superannuates or is discharged or dismissed from employment or on death of the worker. The computation of such encashment will be based on the average daily wage of the worker.

• Factories Act has provided annually/earned leave of 12 working days for all the workers who have worked at least 240 days in a year.
• Leaves as per Factories Act applies to all Management Staff, Executives, Supervisors, workers and contract workers as all of them fall under the definition of ‘worker’ under the Factories Act.
• Every state has different leave entitlement and leaves policies which should be seen before one defines the leave policy of your company. A company’s leave policy cannot be less than that mentioned by the State’s shop and establishment act.
• If the Employee has quit or has been terminated, his earned leave balance should be paid to the employee and in case of death, to the nominee, within 2 days.

Law for Leave

• Leave is covered in entry no. 5 Conditions of, a procedure in applying for, and the authority which may grant, leave and holidays under MATTERS TO BE PROVIDED IN STANDING ORDER UNDER in the First Schedule of  THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS) ACT, 1946 ACT NO. 20 OF 1946 23rd April 1946.
• The Standing Orders are to be brought out by the Employers as per the Act and register with the authorities. They are basically Terms and Conditions of employment.
• The provision of Leave is given in the INDUSTRIAL EMPLOYMENT (STANDING ORDERS) CENTRAL RULES, 1946 brought out vide Notification No. L.R. 11 (37), date the 18th December 1946. It provides as follows:-
• Section 9. Leave.–(1) Holidays with pay will be allowed as provided for in 11[Chapter VIII of the Factories Act, 1948], and other holidays in accordance with the law, contract, custom and usage.

(2) A workman who desires to obtain leave of absence shall apply to the employer or any other officer of the industrial establishment specified in this behalf by the employer, who shall issue orders on the application within a week of its submission or two days prior to the commencement of the leave applied for, whichever is earlier, provided that if the leave applied for is to commence on the date of the application or within three days thereof, the order shall be given on the same day. If the leave asked for is granted a leave pass shall be issued to the worker. If the leave is refused or postponed, the fact of such refusal or post postponement and the reasons there for shall be recorded in writing in a register to be maintained for the purpose, and if the worker so desires, a copy of the entry in the register shall be supplied to him. If the workman after proceeding on leave desires an extension thereof, he shall apply to the employer or the officer specified in this behalf by the employer who shall send a written reply either granting or refusing extension of leave to the workman if his address is available and if such reply is likely to reach him before the expiry of the leave originally granted to him.

(3) If the workman remains absent beyond the period of leave originally granted or subsequently extended, he shall lose his lien on his appointment unless he (a) returns within 8 days of the expiry of the leave and (b) explains to the satisfaction of the employer or the officer specified in this behalf by the employer, his inability to return before the expiry of his leave. In case the workman loses his lien on his appointment, he shall be entitled to be kept on the badly list.

 Section 10. Casual leave.–A workman may be granted casual leave of absence with or without pay not exceeding 10 days in the aggregate in a calendar year. Such leave shall not be for more than three days at a time except in case of sickness. Such leave is intended to meet special circumstances which cannot be foreseen. Ordinarily, the previous permission of the head of the department in the establishment shall be obtained before such leave is taken, but when this is not possible, the head of the department shall, as soon as may be practicable, be informed in writing of the absence from and of the probable duration of such absence.

Chapter VIII of the Factories Act, 1948: is on ANNUAL LEAVE WITH WAGES the leave rules:-

Section 79. Annual leave with wages

 (1) Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of—

 (i) if an adult, one day for every twenty days of work performed by him during the previous calendar year;

(ii) if a child, one day for every fifteen days of work performed by him during the previous calendar year.

 Explanation 1.—For the purpose of this sub-section—

(a) any days of lay off, by agreement or contract or as permissible under the standing orders;

(b) in the case of a female worker, maternity leave for any number of days not exceeding twelve weeks; and

(c) the leave earned in the year prior to that in which the leave is enjoyed,

shall be deemed to be days on which the worker has worked in a factory for the purpose of computation of the period of 240 days or more, but he shall not earn leave for these days.

 Explanation 2.—The leave admissible under this sub-section shall be exclusive of all holidays whether occurring during or at either end of the period of leave.

 (2) A worker whose service commences otherwise than on the first day of January shall be entitled to leave with wages at the rate laid down in clause (i) or, as the case may be, clause (ii) of sub-section (1) if he has worked for two-thirds of the total number of days in the remainder of the calendar year.

 (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 his discharge, dismissal, quitting of employment, superannuation or death calculated at the rates specified in sub-section (1), even if he had not worked for the entire period specified in sub-section (1) or sub-section (2) making him eligible to avail of such leave, and such payment shall be made—

(i) 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

(ii) where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuation or death.]

(4) In calculating leave under this section, fraction of leave of half a day or more shall be treated as one full day’s leave, and fraction of less than half a day shall be omitted.  

(5) If a worker does not in any one calendar year take the whole of the leave allowed to him under sub-section (1) or sub-section (2), as the case may be, any leave not taken by him shall be added to the leave to be allowed to him in the succeeding calendar year:

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:

Provided further that a worker, who has applied for leave with wages but has not been given such leave in accordance with any scheme laid down in sub-sections (8) and (9) or in contravention of sub-section (10) shall be entitled to carry forward the leave refused without any limit.

(6) A worker may at any time apply in writing to the manager of a factory not less than fifteen days before the date on which he wishes his leave to begin, to take all the leave or any portion thereof allowable to him during the calendar year:

 Provided that the application shall be made not less than thirty days before the date on which the worker wishes his leave to begin, if he is employed in a public utility service as defined in clause (ii) of section 2 of the Industrial Disputes Act. 1947 (14 of 1947):

 Provided further that the number of times in which leave may be taken during any year shall not exceed three.

Section 79 of the Factories Act provides that every worker who has worked for a period of at least 240 days or more or more in a factory during the calendar year shall be allowed during the subsequent calendar year, year with wages for a number of days calculated 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.

Conclusion

The leave admissible 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 completed 240 days of service. The days of lay off, by agreement or contract or as permissible under the standing orders, maternity leave in case of female workers not exceeding twelve weeks and the leave earned in the year prior to that in which leave is enjoyed shall be deemed to be the days worked in a factory for the purpose of computation of the period of 240 days or more but shall not earn leave for these days. While calculating leave, a fraction of leave of half a day or more shall be treated as one full day’s leave and a fraction of less than half a day shall be omitted. If a worker does not take whole of leave entitled to him in any one calendar year such leave not taken shall by him be added to the leave to be allowed to him in the succeeding calendar year. The total number of days of leave that may be carried forward to the succeeding year shall not exceed thirty in the case of an adult and forty in the case of a child.

Sections 79 and 53 of the Factories Act, 1948 deal with the grant of annual leave with wages and compensatory holidays respectively. Rules framed by the State Governments and Union Territories require factories to furnish information relating to a number of persons employed, the number of persons eligible for leave and the number of persons actually granted leave during the year, has been observed from the consolidated returns received from various States/Union Territories for annual leave with wages were granted leave during the year, 2004. The provisions relating to leave and compensatory holidays were reported to be generally well observed in various State/Union Territories.