Leave refers to the absence of an employee from his duty or work because of some unavoidable reasons and with due permission of the employer or the organisation. Workers in every organisation should be provided with a sufficient number of leaves so that they may refresh and revitalize themselves and contribute their best effort to the organization. Leave policy may vary from one company to another depending upon its work culture and organisational set up.The important features of a leave policy may be:-
- The leaves may be computed on an yearly or monthly basis.
- The number and types of leave are fixed in advance for each organisation. The total number of leaves may vary from 15 days to a month in a year. If the number of leaves for an employee exceeds the permitted number , then there is deduction from the salary of equivalent amount. The types of leave in a company may be:- casual leave; leave for academic work; medical leave; maternity leave or study leave,etc.
- The unutilised leaves may lapse at the end of the year or may be carried forward to the next year.
- The payment mode for each leave day may be full payment or half payment.
In some organisations ,there is a provision of Leave Encashment benefit in addition to other benefits provided by the employer to their employees. Leave encashment is a lump sum amount payable to the employees or their dependents on retirement, death, disablement, etc. It is generally provided at the end of the year and it also includes medical leave encashment. But such a provision can be a huge liability to the company. Hence,LIC(Life Insurance Corporation)of India has introduced Group Leave Encashment Scheme which helps the employers in funding their leave encashment liability by paying a yearly premium to LIC. Under this scheme,the Company has to submit the employees' data and rules for Leave Encashment to LIC. In turn, LIC will make actuarial valuation and find out the funding requirements of the company. The company will contribute as per the advice of LIC. A small term insurance premium will be charged in addition to contributions for funding. This scheme has the following benefits:-
- Employee,the amount of encashment of leaves during the service will be paid from the fund of the scheme maintained with LIC.
- On the death of an employee, in addition to his/her leave encashment benefit, his/her family will be entitled to the amount of insurance cover, which will be tax-free.
A business firm should formulate a proper leave policy for its employees because on one hand it will be beneficial for its workers and on the other hand it will profitably influence the productivity and performance of the company itself.