Can employees be asked to utilize their accrued annual leave for this lockdown? Once such leave has been exhausted, can they be placed on unpaid leave? What are the other alternatives available?

No. Employees are entitled to use their accrued annual leave at their discretion, subject to approvals from their managers. While employees may be encouraged to use their accrued annual leave, they cannot be mandated by the employer to do so. Further, employees are eligible to en cash their accrued but un-availed annual/privileged leave at the time of cessation from employment.

As a general rule under the Indian law, employers cannot mandate employees to proceed on unpaid leave. Therefore, in the context of the lockdown, if an employer requires its employees to not come to work as a preventive measure or for the duration of the lockdown, employees will need to be paid for such days and therefore, they cannot be forced to utilize their annual leave at this time.

Certain measures that employers may take to reduce employee costs are as follows:

Reduce Working Hours

Employees in India are largely divided into two categories, viz., workmen and non-workmen, and the manner of implementing changes to conditions of service vary based on the category of employee. In this regard, please note the following in relation to changes to conditions of service for both categories:

Workmen: The Industrial Disputes Act, 1947 (ID Act) mandates that employees categorized as ‘workmen’ be given at least 21 days prior notice (in the prescribed format) of any detrimental change in the terms of employment listed in the Fourth Schedule of the ID Act. The conditions listed in the Forth Schedule include (i) wages; (ii) social security contributions; (iii) compensatory and other allowances; (iv) hours of work, rest and shift working; (v) leave and holidays; (vi) withdrawal of customary concession or privilege; and (vii) introduction of new rules of discipline or altering existing rules. Such notice does not have to be given if the change being made to the condition of service is more beneficial to the workmen. State-specific rules require that this notice also be forwarded to labour authorities.

For Non-Workmen (and conditions of service not contained in the Fourth Schedule): The consent (express or implied) of the impacted employees to the change would need to be obtained, unless the employer has retained the right in the existing employment documentation to unilaterally change the terms of employment. In such case it would be sufficient to notify the employees of the change.

Additionally, to implement a change to the working hours, an employer would have to consider the terms of any collective bargaining agreement(s) or settlement agreement(s) that may be in place with its employees. Therefore, while you may reduce working hours, if there is a consequential reduction in wages/ benefits, the process detailed above would need to be followed.


Under Indian law, lay-off does not mean termination/cessation of employment. A ‘lay‑off’ under the ID Act is defined as the failure, refusal or inability of an employer to give employment to a workman on account of shortage of coal, power or raw materials or the accumulation of stocks or the break-down of machinery or natural calamity or for any other connected reason. During the lay-off, the workman will continue to be employed with the employer; but will not be required to come into work. An employer is required to pay every workman who has completed one year of continuous service (calculated as 240 days) a compensation equal to 50% of the total basic wages and dearness allowance for every day that he is laid-off, excluding weekly holidays.

For non-workmen, the employer would be guided by the terms of the employment agreement and human resource policies. If these documents are silent on these aspects, then an employer would have to contractually agree with the employee for the lay-off.

Ordinarily, there is no requirement to provide notice to ‘lay-off’ workmen category employees. However, if the establishment is a factory in which not less than 100 workmen (300 in some states) were employed on average per working day in the preceding 12 months, then an application would have to be made to the relevant labour authority seeking permission for the lay-off, unless the lay-off is due to shortage of power or a natural calamity. Please note that notification requirements could also vary based on the State in which the establishment is located.