Leave encashment refers to the process where an employee receives a monetary compensation for the unused or accumulated paid leave days that they have not utilized during their tenure with an organization. This compensation is typically provided when an employee resigns, retires, or at other specific instances defined by company policies or labor laws.
Employees accrue paid leave days based on company policies, employment contracts, or labor laws. These could include vacation days, earned leaves, or any other form of paid time off. The leave balance that remains unused by the employee becomes eligible for encashment. Leave encashment is typically triggered by specific events such as resignation, retirement, or other predefined circumstances. Some organizations may have policies allowing employees to voluntarily opt for encashment under certain conditions.