Am I entitled to encashment of unused leave when I resign?

Question

I have several days of earned leave unused and I am resigning soon. Am I entitled to be paid for this unused leave? I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Factories Act 1948, Section 79 is the starting point for this labour law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

Section 79 of the Factories Act entitles workers in factories to earned/annual leave with wages, and if such leave remains unavailed at the time of resignation, discharge, or death, the employee (or legal heirs) is entitled to be paid wages for the unavailed leave.

State Shops and Establishments Acts similarly provide for earned leave accrual (commonly at a rate of around 1 day for every 20 days worked) and generally require encashment of unutilised leave on cessation of employment, though the exact entitlement varies by state.

Company policy may provide for a more generous leave encashment scheme or may cap the number of days that can be carried forward or encashed, but such policy cannot reduce entitlements below the statutory minimum under the applicable Act.

Leave encashment amount is typically computed based on the employee's basic salary and dearness allowance at the time of leaving, multiplied by the number of unavailed eligible leave days.

If denied, the employee can raise this as part of a claim before the Payment of Wages Authority (if wage threshold applies) or through a written demand and civil claim for unpaid dues.

What to do next: 1) Check your leave balance in the HR system and compare it with your appointment letter's leave policy; 2) Request a detailed full and final settlement statement showing the leave encashment calculation; 3) Raise a written dispute with HR if the encashment amount or eligibility appears incorrect; 4) File a claim before the Payment of Wages Authority or send a legal notice if unresolved.

If you are unsure whether your facts fall inside Factories Act 1948, Section 79, that is worth checking with an advocate before you commit to a route, because switching later costs time. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in labour law.