Author: Amrut Ashok Chitragar
Published on: 24.08.2025
Last Updated: 24.08.2025
📌 TL;DR – Quick Summary:
Many workers unknowingly lose Gratuity benefits because they don’t understand Leave Wages under the Factories Act.
- ✅ Every 20 working days = 1 day paid leave (PL).
- ✅ Maximum 30 days can be carried forward; extra must be encashed.
- ✅ If PL is wrongly marked as “Absent,” you may fail the 4 years 240 days rule → lose gratuity eligibility.
- ✅ Correct “Leave with Wages” recording = salary + rest + gratuity credit.
👉 Protect your rights: keep payslips, leave records, and use PL wisely.
📑 Table of Contents:
- Why Leave Wages Matter
- What is Leave with Wages?
- Key Features of Leave Wages
- Payment Rules under Factories Act
- Privilege Leave Rules for Workers
- Real-Life Example – Ramesh (Belgaum)
- Law vs Reality Comparison
- Other Leave & Benefits in Karnataka
- Dummy Wage Register – PL vs Absent
- Action Plan for Workers
- FAQ on Leave Wages
- Karnataka Labour Department Contact
- Final Takeaway
🏭 Leave Wages in Factories – Hidden Benefits Every Worker Should Know
🔹 Why is this Important?
Most factory workers do not know what the law says about leave and wages. They usually think:
- “The HR team looks after it, why should I worry?”
- “Getting some money during festivals is enough.”
- “Laws are too complicated, I don’t have time to read them.”
The real truth is this 👉 If you depend only on what the company gives, the true value of your hard work may slip out of your hands.
Because the Factories Act is not limited to salary alone – it quietly provides you with paid leave, rest days, carry-forward benefits, and extra value in gratuity. But most workers don’t realize this. Management also continues with the “old practice,” and hence the benefits stop halfway.
So now let’s look a little deeper 👇
- What does “Leave with Wages” really mean?
- How should it work in practice?
- What actually happens in real factories?
- And most importantly, how does it impact your gratuity and long-term money?
🔹 What is Leave with Wages?
Every worker in a factory is entitled not just to salary but also to the right to take paid leave. In law, this is called “Privilege Leave (PL)” or “Earned Leave (EL).”
- 👉 For every 20 days of work, you get 1 day of paid leave.
- 👉 On average, this equals about 14 days of leave per year.
🔹 Key Features of Leave Wages
- Eligibility: Must have worked at least 240 days in a year.
- Rate: 1 day of paid leave for every 20 days of work.
- Carry Forward: Maximum 30 days can be accumulated.
- Encashment: Any leave above 30 days or upon termination of service can be encashed in cash.
- Payment Rules: Explained in detail below.
🔹 Leave Wages Payment Rules under Factories Act (Sec. 79 Example)
What does the law say? (Factories Act, 1948 – Section 79)
According to the Factories Act Leave Wages rules, the payment of Leave with Wages must be based on Average Daily Wages. This is not calculated on calendar days but on the average working days of the last 3 months. This ensures fair pay when employees take Privilege Leave (PL) or Earned Leave (EL).
- Wages can be adjusted in the next monthly salary cycle.
- 👉 Example: If 2 days PL is taken on 15–16 June, then the June salary (paid on 30 June) will already include payment for these 2 leave days.
- As per Leave Encashment Rules in India, the payment must be made at least 1 day before the leave starts.
- 👉 Example: Monthly salary = ₹30,000. Working days in September = 26.
- Average Daily Wages Calculation: ₹30,000 ÷ 26 = ₹1,153.85 ≈ ₹1,154.
- 7 days PL (10–16 September) → 7 × 1,154 = ₹8,078.
- This ₹8,078 must be paid in advance by 9 September.
- At month-end, wages for the remaining 19 working days will be calculated → 19 × ₹1,154 = ₹21,923.
- Total monthly salary = ₹8,078 (advance) + ₹21,923 (attendance-based) = ₹30,001 (after rounding).
⚖️ Legal Reference: As per Factories Act, 1948 – Section 79, Leave Wages = Wages of last 3 months ÷ total working days in that period = Average Daily Wages.
🔹 Privilege Leave (PL) Rules for Employees in Factories
- Advance Notice: For PL more than 4 days, apply at least 15 days in advance.
- Installments: Privilege Leave can be used in a maximum of 3 installments in one year.
- Minimum Duration: Generally a minimum of 5 days at a time (depends on company policy).
- Written Proof: Application must be in written form or entered in a signed leave register.
👉 Following these PL rules keeps both workers and management safe and compliant with the Factories Act Leave Wages provisions.
🔹 Real-Life Example – Ramesh from Belgaum
- Monthly Salary: ₹30,000 (≈ ₹1,000 per day)
- Annual Working Days: Around 280 days
- PL (Privilege Leave) Earned Each Year: 14 days
Year-wise Leave Record:
📊 Annual Leave Record – Ramesh (Belgaum Case Study)
| Year | Earned Leave (EL) | Used | Carry Forward | Encashment | Extra Benefit |
|---|---|---|---|---|---|
| 2024 | 14 | 4 | 10 | – | – |
| 2025 | 14 | 5 | 19 | – | – |
| 2026 | 14 | 3 | 30 (Maximum Limit Reached) | – | – |
| 2027 | 14 | 2 | 30 | 12 | ₹12,000 Extra Benefit |
👉 From this case, it is clear: an employee can bank a maximum of 30 days of PL. Anything above that will automatically be given in cash form (leave encashment) as per Leave Encashment Rules in India.
🔹 What the Law Says vs What Really Happens in Factories
| Aspect | As per Law (Factories Act) | In Reality | Impact on Workers |
|---|---|---|---|
| Use of PL | Salary must be paid even if leave is taken | Sometimes instead of marking PL, attendance register shows “Absent” | Service Days record becomes weaker if PL is marked as Absent |
| Carry Forward | Right to carry forward up to 30 days | Forced encashment is done every year | Flexibility is reduced → Worker cannot build a proper leave bank |
| Payment Timing | If leave is more than 4 days → advance payment must be given | Total amount is paid only at month-end | Cash shortage during leave → problem in emergencies |
| Attendance Record | PL = Paid Leave (not Absent) | Most of the time marked as “Absent” | Weak Service Record → Loss of Gratuity Eligibility |
🔹 Other Leave & Employee Benefits in Karnataka (Factories Act)
- National + Festival Holidays: Minimum 8 days (4 national + 4 festival).
- Weekly Rest Day: 1 day every 7 days (generally Sunday).
- Overtime Pay: More than 9 hours/day or 48 hours/week → double wages.
- Casual/Sick Leave: Not mandatory under Factories Act; some companies provide as per policy.
- PF & ESI: Applicable as per eligibility and organization coverage.
📑 Dummy Wage Register – PL vs Absent
| Year | Worked Days | PL Days | Total Days (Service) |
|---|---|---|---|
| 2023 | 230 | 10 | 240 |
| 2024 | 232 | 12 | 244 |
| 2025 | 228 | 14 | 242 |
| 2026 | 229 | 11 | 240 |
| 2027 | 231 | 9 | 240 |
| Result (After 4 Years + 240 Days) | ✅ Gratuity Eligible ≈ ₹86,500 | ||
| Year | Worked Days | Marked | Total Days (Service) |
|---|---|---|---|
| 2023 | 230 | 10 Absent | 230 |
| 2024 | 232 | 12 Absent | 232 |
| 2025 | 228 | 14 Absent | 228 |
| 2026 | 229 | 11 Absent | 229 |
| 2027 | 231 | 9 Absent | 231 |
| Result (After 4 Years + 240 Days) | ❌ Gratuity Not Eligible = ₹0 | ||
⚠️ The above tables are only examples.
Gratuity is calculated on the entire service period (4 years + 240 days or 5 years).
👉 If PL is wrongly marked as Absent, the worker may have to work extra days or fight legally to ensure PL is counted towards service for gratuity — even if in the company register it is wrongly shown as Absent.
📌 Summary:
- Old Practice – Annual Encashment: Some factories give unused Privilege Leave (PL) in cash every year. This method is not legally correct. In this practice, workers get a small annual payout, but continuous service days reduce, which can impact Gratuity eligibility.
- Correct Legal Method – Recording Leave with Wages: If PL days are recorded as “Leave with Wages,” they are counted as part of service, helping to meet the 240 days rule. This way, workers enjoy annual rest and also gain the long-term Gratuity benefit under Factories Act Leave Wages rules.
👉 The real benefit comes only when PL is properly recorded as Leave with Wages.
🛠️ Action Plan for Workers – How to Protect Leave Wages & Gratuity
- Keep all salary slips and PL encashment receipts safely.
- Always apply for leave with a written application.
- Regularly check your PL balance – remember only up to 30 days can be carried forward.
- At the time of resignation, ensure you receive full PL encashment and that it is included in Gratuity calculation.
- If rules are not being followed, contact the Karnataka Labour Office for support.
❓ Frequently Asked Questions (FAQ) on Leave Wages
📌 Before ending this article, here are some common questions about Leave Wages that will help workers understand the topic better:
Q1. What are Leave Wages?
A1. Leave Wages mean paid leave given to a worker based on the number of days worked. In simple words, even if you take leave, you still get your salary.
Q2. How are Leave Wages calculated?
A2. As per the Factories Act Leave Wages Rule: For every 20 days of work, 1 day of paid leave is earned. Example: If you work 240 days, you get around 12–14 days of Privilege Leave (PL).
Q3. What is the percentage of Leave Wages?
A3. Normally, monthly salary ÷ working days = per day wages. For every 20 days, 1 day of leave wages is earned. This works out to about 5% entitlement.
Q4. What is Leave Wages Encashment?
A4. If unused PL exceeds the 30-day limit, the company must pay that balance in cash. However, forcing annual encashment every year is not legal under Factories Act.
Q5. How do Leave Wages affect Gratuity?
A5. If PL is recorded as Leave with Wages, it is counted in service days. This helps meet the 240 working days rule and ensures Gratuity eligibility. If it is wrongly marked as Absent, the benefit is lost.
Q6. Do Leave Wages apply to all workers?
A6. Yes, they apply to all workers under the Factories Act. But note: Casual Leave / Sick Leave come under separate rules and policies.
Q7. What about Contract Labour?
A7. Contract workers are also entitled to paid leave based on days worked. Implementation may vary depending on company and contractor policies.
Q8. What is the maximum limit of Leave Wages?
A8. Maximum carry forward limit is 30 days. Anything above this must be encashed.
Q9. What are the rules in Karnataka?
A9. In Karnataka: Minimum 8 days holidays (4 National + 4 Festival), 1 weekly rest day, and Factories Act Leave Wages rules apply to all workers.
Q10. Meaning of Leave Wages in Hindi/Tamil?
A10. Hindi: वेतन सहित अवकाश (Paid Leave). Tamil: ஊதியத்துடன் கூடிய விடுப்பு (Paid Leave).
💡 For more clarity, always refer to the official Factories Act or contact the Karnataka Labour Office.
📞 Karnataka Labour Department – Contact Information
Last Verified: 23.08.2025
Source: Karnataka Labour Department – Head Office
▶️ Show / Hide Contact List
| Sl.No | Name | Designation | Office Number | Address | |
|---|---|---|---|---|---|
| 1 | Sri H.N. Gopalakrishna, I.A.S | Labour Commissioner | labour.commissioner42@gmail.com | 080-29753078 | Karmika Bhavan, Dairy Circle, Bannerghatta Road, Bangalore - 29 |
| 2 | Sri Srinivas K | Director, Dept. of Factories, Boilers & Safety Institute | directorfbish@gmail.com | 080-29753051 | Karmika Bhavan, Dairy Circle, Bannerghatta Road, Bangalore - 29 |
| 3 | Dr. Varadaraju | Director, Employee State Insurance Scheme Medical Services | dir-esi@karnataka.gov.in | 080-23324216 | S. Nijalingappa Road, II Block, Rajajinagar, Bangalore - 560010 |
ℹ️ Important Note for Workers
⚠️ In case of any complaint or confusion, always submit a written application to the Labour Office. Keep copies of your salary slips, leave applications/approvals, and encashment receipts. This ensures your rights are legally protected under the Factories Act Leave Wages rules.
✅ Final Takeaway
Leave with Wages is not just a bonus. It includes: Paid Leave + Salary + Gratuity Credit.
Every worker has this right. But due to forced encashment and incorrect records, half the benefit is often lost.
👉 Keep proper proof, know your rights, and use PL wisely. This way, you get the true value of your hard work and long service.