Earned leave carry forward and encashment - Karnataka Shops & Comm. Est


As per the latest amendment to ‘The Karnataka Shops & Comm. Establishments Act’, the total no. of annual leave days that may be carried forward to the succeeding year is 45. In this regard, I would like to know if leave encashment can be provided as an option instead of allowing the entire un-used Earned Leave balance to be carried forward to the next year and then have a limit for carry forward? There will be no lapse of Earned leave, it just gets encashed instead. Is this legally allowed?

Thank you and regards


Dear Deepa,

We practice the following:

Casual Leave to be utilised within the same financial year or calendar year, depending on your organization’s policy

Earned Leave can be carried forward, any leave over and above 30 days will be credited to the Employee’s account at end of the financial year. Therefore, 30 days leave will continue to be in their credit.

Sick leave also will be carried forward to a maximum of 30 days, thereafter all leave over and above 30 days gets lapses.

Karnataka Shops & Establishment are concerned about Earned Leave and Sick Leave, which are updated in Form-T

Casual leave doesn’t come under their purview.

Hope this helps.


Hi Sathya,

Thank you for your immediate response and sharing the information. However, what we are trying to find out is if leave encashment can be provided in lieu of accumulation in the backdrop of the recent change made in Karnataka, i.e. max. accumulation of Earned leave has been increased from 30 to 45. More specifically, if leave encashment on a yearly basis instead of accumulation is legally permissible?

Thank you and Regards


I think it is up to the management. Management may amend the leave policy, get the concurrence and implement it in the organization. The scope of the rule change is in the cap of the leave accumulation only. Encashment is up to the organization.

The employee now can ask an EL carry forward for up to 45 days. However, if the organization is willing to encash up to x number of days, for the first year (based on the company’s financial bandwidth) of the policy rollout and x 1 number of days for subsequent years, most employees opt for encashment. So a manageable balance only will be carry-forwarded. If one can encash, annually, for up to 10 days, then there is no question of so much accumulation and no burden of processing so much EL encashing, all of a sudden.


Sorry this comes in a little late. Thank you very much for your response and inputs.


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