Ever felt the need for a longer break but worried about your paycheck? That’s where privilege leave steps in – giving employees the chance to take time off without financial stress.
Also called earned leave – it is a vital part of workplace benefits, promoting work-life balance and personal well-being.
But how exactly does it work?
How is it calculated?
And can it be encashed?
This blog unpacks everything you need to know about privilege leave in India, from its meaning to its rules – making it simple for both employees and employers to understand.
What is Privilege Leave?
Let’s start with privilege leave meaning.
Privilege leave, also known as earned leave – is a type of paid leave that employees earn for the work they complete over time. It allows employees to take time off for – personal reasons, extended vacations, or other needs without losing their salary. This leave is a statutory benefit governed by labour laws and varies across industries and organizations in India.
Typically, employees earn privilege leave based on the number of days they work – with most organizations offering around 15-20 days per year. In many cases – unused privilege leave can be carried forward to the next year or even encashed at the end of employment.
Privilege Leave Reasons
Privilege leave is typically used for planned or personal reasons. Here are some common reasons employees take privilege leave.
- Vacations: To relax and recharge by travelling or spending time with family and friends.
- Family events: For attending weddings, birthdays, or other important family functions.
- Personal commitments: To handle personal tasks like moving to a new home or settling financial matters.
- Health breaks: For taking a break to rest and recover, even if not due to illness.
- Extended holidays: To combine with weekends or public holidays for a longer break.
Make sure you use the right reason for privilege leave. This way – your leaves will get approved easily.
Benefits of Privilege Leave
Privilege leave benefits both employees and organizations – promoting productivity and overall satisfaction.
Benefits for Employees
- Work-life balance: Employees can manage personal tasks and take time off for relaxation or family needs.
- Stress relief: Taking breaks reduces stress from work. It helps prevent burnout and improves mental health.
- Financial security: Privilege leave is paid. Employees don’t lose their salary when they take time off.
- Flexibility: Unused leave can be carried forward. This helps employees plan long vacations or time off in the future.
- Encashment: Some companies allow employees to encash unused leave. This provides extra money.
Benefits for Organizations
- Increased productivity: Well-rested employees return to work with more focus and energy. This boosts their performance.
- Employee retention: Providing privilege leave improves job satisfaction. Employees are more likely to stay with the company.
- Positive work environment: Employees feel valued when they receive paid leave. This leads to better morale and teamwork.
- Attracting talent: A good leave policy makes the company more appealing to new employees.
- Reduced absenteeism: Scheduled leave helps employees manage their time better. This reduces unplanned absences.
Is Privilege Leave and Earned Leave The Same?
Privilege leave and earned leave are often used interchangeably – as they serve similar purposes. However, there are a few differences between the two.
So, what is the difference between PL and EL leave?
The Relevant Laws
The distinction arises from the laws governing them in India. The term “Earned Leave” (EL) is used under the Factories Act to define employee leave rights.
On the other hand, “Privilege Leave” (PL) is used under the Shops and Establishments Act to refer to the same concept.
Leave Accumulation
Under the Factories Act – one earned leave is given for every 20 working days.
In contrast, the Shops and Establishments Act typically provides five privilege leaves every four months of employment – adding up to around 15 days per year.
However, each company may have its own rules regarding how leave is accumulated and used.
So, while both types of leave serve the same purpose, the specific rules depend on the governing laws and the company’s policies.
Key Laws Governing Privilege Leave
In India, privilege leave (or earned leave) is governed by various labour laws that set the rules for how leave should be granted to employees. Here’s an overview of the main laws and rules that govern privilege leave.
- The Factories Act, 1948: This law applies to factories across India. It provides for earned leave for workers who have worked a certain number of days within a year.
- The Shops and Establishments Act: This law applies to commercial establishments, including shops and offices. It grants employees earned leave after working for a specific duration within the year.
- The Mines Act, 1952: This law applies to mining workers – offering earned leave to those who meet a specified number of working days in a year.
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Privilege Leave Rules in India
Below, we explain each rule in detail to provide a clear understanding of privilege leave in the country.
- Eligibility for Privilege Leave
Not all employees are automatically eligible to request privilege leave. There are certain requirements that need to be met – which depend on both the law and the company’s policies. Generally, to qualify for privilege leave – employees must meet the following conditions.
- Minimum work period: Employees usually need to work for a specified period – typically around 240 days – to be eligible to earn privilege leave.
- Completion of probation: If there is a probation period – the employee must complete it before they can apply for leave.
- Advance application: Employees must apply for privilege leave at least 15 days before the planned leave.
- Sufficient leave balance: Employees must have enough available privilege leave to cover the days they want to take off.
- Accumulation of Privilege Leaves
Typically, privilege leaves can be carried forward for up to 3 years before they expire. In this period, employees can accumulate around 30 days of leave. However, under the Shops and Establishments Act, this limit can be extended to 45 to 60 days.
However, companies can set their own limits. The process of accumulation is based on the number of days worked.
- Privilege Leave Application
For employees to avail of privilege leave – they are required to submit a leave application to their employer in advance. The typical notice period is around 15 days – although this can vary based on the company’s policies.
Typically, the process begins when an employee submits a leave request – either manually or through an online platform. While the manager can reject a leave request – it is important to note that the rejection should be based on a valid reason. If a request is denied without a proper explanation – employees may have grounds to file a legal complaint.
- Privilege Leave Encashment
In India, it is mandatory for employers to provide for the encashment of privilege leave. If an employee doesn’t use their privilege leaves – they have two options –
- Carry them over to the next year
- Or choose leave encashment
Leave encashment refers to the cash payment an employee receives for unused privilege leaves that haven’t expired. This becomes applicable when an employee resigns, retires, or is terminated from their job.
Most organizations calculate this benefit by including the employee’s basic salary and dearness allowance (DA). But in some cases, the calculation might be based on the gross salary.
Here is a common formula used for calculating privilege leave encashment.
(Basic salary + DA / Number of working days in a month) x Number of Privilege Leaves
If your company doesn’t provide DA – you can skip it in the calculation.
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Example of Privilege Leave Encashment Calculation
Let’s say an employee has accumulated 60 unused privilege leaves. They worked 28 days in the month – and their basic pay along with DA is Rs. 35,000 for the past 12 months. The calculation would look like this:
(35,000 / 28) x 60 = Rs. 75,000
So, the employee would receive Rs. 75,000 as leave encashment for their unused privilege leaves.
- Privilege Leave Carry Forward
Many companies allow employees to carry forward unused privilege leave to the next year. The number of days an employee can carry forward typically depends on company policy.
Some companies may allow a full 30 days to be carried over, while others may limit the carryover to 10 or 15 days. However, there is often a limit on how many days can be carried forward to avoid excessive leave accumulation.
- Minimum Privilege Leave
According to the Ministry of Labour and Employment, employees should receive at least 15 days of privilege leave each year. This minimum leave entitlement guarantees that employees have enough time for rest and personal matters.
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Privilege Leave Calculation
Are you wondering how privilege leave is calculated?
It is generally calculated based on the number of days an employee has worked in the organization during the year. Here’s how it is typically calculated.
- Number of days worked: The total number of days an employee has worked in the organization is calculated. This includes regular working days and any paid leave taken during the year.
- Leave entitlement: Typically, employees are entitled to a certain number of leave days for every month or year worked. For example, many organizations provide 1 day of leave for every 20 days worked. Some businesses may offer 12 to 15 days of privilege leave annually – depending on the company policy and local labour laws.
- Leave accrual: Leave is often accrued on a monthly or yearly basis. For instance, if the entitlement is 15 days per year – the employee will accumulate about 1.25 days of leave every month (15 days ÷ 12 months).
- Leave balance: The balance of privilege leave is calculated by subtracting any leave taken from the total entitlement. This balance can either be carried over to the next year or encashed as per the company’s leave policy.
So, in summary:
- Days worked + Leave entitlement = Total leave earned
- Total leave earned – Leave taken = Leave balance (which may be carried forward or encashed).
Each company may have slight variations in this process based on their policies and local regulations.
Example of Privilege Leave Calculation
Let’s say an employee is entitled to 12 days of privilege leave per year.
- If the employee works for 12 months in the year – they would earn 12 days of leave.
- If they take 5 days off during the year – their leave balance would be:
12 days (earned leave) – 5 days (leave taken) = 7 days (remaining leave balance)
So, the employee would have 7 days of privilege leave left to either carry forward to the next year or encash at the end of the year.
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Privilege Leave Example
Here’s an example to understand privilege leave better.
Let’s say Riya is an employee at a marketing firm in Mumbai. Her company follows the Shops and Establishments Act – which means she is entitled to 20 days of Privilege Leave (PL) each year.
- Earning leave: Riya earns her 20 PL days by working throughout the year. For every month she works – she accrues approximately 1.67 days of leave.
- Using leave: In June, Riya plans a family vacation and decides to take 10 days of PL. She submits her leave request in advance – and her manager approves it – allowing her to enjoy her time off without any loss of salary.
- Carry forward: By the end of the year – Riya has 5 unused PL days. Her company’s policy allows her to carry forward these days to the next year – giving her a total of 25 PL days for the following year.
- Encashment: If Riya decides not to carry forward her remaining 5 PL days – her company offers an option to encash them. This means she can receive payment for those unused days – adding extra income to her salary.
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Privilege Leave Application
Applying for privilege leave is a simple process. Follow these steps.
- Review company policy: Start by checking your company’s leave policy to make sure you meet the eligibility criteria.
- Plan in advance: Choose the dates you want to take off and inform your employer as early as possible to help them manage your absence.
- Submit a request: Send a formal request to your supervisor or HR – mentioning the dates you want to take leave and the reason for your absence.
- Wait for approval: Your employer will evaluate your request and decide whether to approve or deny it. If it’s denied – ask for reasons and adjust your request if necessary.
- Take your leave: Once your leave is approved, enjoy your time off to relax and recharge.
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Privilege Leave Application Sample
Here is a privilege leave request mail sample you can use.
Subject: Request for Privilege Leave
Dear [Manager’s Name],
I hope you are doing well. I would like to request privilege leave from [start date] to [end date], as I need to attend to [brief reason, if necessary].
Please let me know if this leave request can be approved or if you require any further information.
Thank you for your consideration.
Best regards,
[Your Name]
[Your Position]
[Your Contact Information]
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Privilege Leave vs Casual Leave
Now, let’s understand casual leave vs privilege leave.
So basically, the difference between privilege leave and casual leave lies in their purpose, usage, and rules.
| Privilege Leave (PL) | Casual Leave (CL) |
| For planned time off, such as vacations or personal matters. | For short-term, unexpected leaves like personal emergencies. |
| Accrued over time (monthly/yearly). | Typically given as a set number of days per year. |
| Can usually be carried over to the next year. | Typically, it cannot be carried forward. |
| Usually requires advance notice (15-30 days). | Requires short notice (usually 1-2 days). |
| Accumulated over the year and may be encashed. | Usually, not accumulated, must be used within the year. |
| For longer durations or planned leaves. | For short, unplanned leaves. |
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Wrapping Up
Privilege leave is an important benefit for employees – offering paid time off for personal or planned breaks. Understanding the rules and calculation methods helps both employers and employees manage leave effectively.
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FAQs
What is privilege leave policy?
Privilege leave policy defines the rules, eligibility, and process for applying, accumulating, and encashing privilege leave in an organization.
Is privilege leave encashable?
Yes, privilege leave is encashable. Employees can receive monetary compensation for unused privilege leave, as per company policy.
What is leave encashment?
Leave encashment is the payment made to employees for unused leave days instead of taking time off.
What is the PL encashment rule?
The PL encashment rule allows employees to encash their unused privilege leaves, typically at the time of retirement, resignation, or separation.
Is privilege leave paid?
Yes, privilege leave is paid. Employees receive their regular salary during the time they are on privilege leave – as it is part of their entitlement.
What is advance privilege leave?
Advance privilege leave allows employees to use leave before accumulating enough days – subject to company policy.
Can I claim privilege leave encashment after resignation?
Yes, employees can claim privilege leave encashment after resignation if they have unused leave days.
