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Earned Leave Amendment - Karnataka Shops & Commercial Establishments Act

authorIcon By greytHR 2 minute read topicIcon Statutory Compliances

Earned Leave Amendment - Karnataka Shops & Commercial Establishments Act

In February 2021, the Karnataka government amended the carry forward limit for annual leave from the earlier 30 days to 45 days now under the Shops & Commercial Establishments Act. 

Every state in India has a Shops & Establishments Act that mandates the various leave rules for employees. The employers must grant annual leave to employees subject to certain conditions.

In Karnataka, as per the Karnataka Shops and Commercial Establishments Act, 1961, every employee is entitled to leave with wages at the rate of one day for every twenty days of work performed by an adult employee and one day for every fifteen days of work performed by a young person. 

So, in a given year, an employee earns around 18 days of annual leave in a year. The balance goes down as and when the employee avails annual leave. (Along with the annual leave, sick leave and casual leave are also to be granted as per the act.)

However, unlike other types of leave, unused annual leave balance does not lapse at the end of the year but can be carried forward to the following year. 

So far, an employee could carry forward a maximum of 30 days of annual leave balance. Beyond this limit, the leaves would lapse. If the employer so desires, the excess leave balance over and above the maximum carry forward limit can be converted to cash instead of letting it expire.

Recently, the Karnataka government amended this provision and enhanced the carry forward limit to 45 days. Let’s elaborate this in legalese:

The State Government of Karnataka vide its notification dated 19 February 2021, passed an Amendment to the existing provision under section 15 under sub-section (7)  first proviso, the total annual leave that may be carried forward to the succeeding year shall not exceed forty-five days. i.e., an employee can carry forward the accumulated earned leaves up to a maximum of forty-five days to the following year. Any earned leave accumulated more than 45 days will lapse.

The accumulated leave encashment will be based on the prevailing rates of wages as on the date of encashment. The employers have to make the required changes in their internal leave policy. If an employer is already providing a better leave accumulation policy, there is no restriction. 

Click here to read/download the notification.

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