How to calculate Leave Encashment??
CiteLegal
 
HOME RISE NEW ABOUT LOGIN
Home > Human Resource Section > Human Resource Management

How to calculate Leave Encashment??

palak singh Started The Discussion:

Hi

Please tell me how do we calculate leave encashment. For Eg: Monthly gross salary is Rs.10,000/- Out of which, Basic=5000, HRA=2500, Medical=1250, Conv=800, Misc Allw=450, Then how much would be leave encashment of 5 days?? Is the leave encashment calculated on last earned basic or it is calculated on the basic for the period during which the leave was earned??

Thanks
Palak

zafariqbal - Member Since: Oct 2006
when you receive any reply of this please tell me also.



:evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil:

ZAFAR
0333-2346067
PAKISTAN

:evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil: :evil:

swastik73 - Member Since: Oct 2005
Dear Palak,

It is mostly calculated on last drawn Basic Pay, but can vary from one Organisation to another.

If the employee falls inside the purview of any Act like Factories Act, Shop and Establishment Act, Mines Act, etc. which has Leave Encashment provisions then that rule must be followed.

Regards,
SC

Nutz - Member Since: Jun 2007
Dear Palak,

Whats is your company leave policy on it? It can be either calculated on the monthly gross salary or on your monthly basic salary!


Lets take an example :D

XYZ is earning 10,000p.m S/he is entitled to have 24 days as PL in a year, which is 2 days a month. At the end of year she has 20 days PL left and s/he would like to encash it! Now again what is stated in your policy? What is maximum number of days that a person can encash his/her leave. Lets take it as 15 days a year!

Now the calucations:-

Gross Salary pm - 10,000
PL left in year 2006 - 20
No. of days of encashment - 15
Leave Encashment Amt - 10,000*15/30 = 5000 INR (TDS applicable)

I hope that this has helped you :)

Take care....

amuril - Member Since: Apr 2007
Hi All,

I just want to comment that the calculation of 15 days of paid leave enchashment done above is incorrect. I am in the HR dept. of a reputed University in Abu Dhabi and I check the Pay Roll calculations each month.

15 days paid leave salary should be calculated as follows:

= (10,000 x 12) / 365 = per day salary x 15 days.. therefore,

= (10,000 x 12)/ 365 = 328.77 x 15 days = 4,931.50


We cannot do 30/2 to get 15 days of pay as some months of the year have 31 days. We need to get the earned leave salary per day and then multiply it by the leave balance.

Regards,

Amrita

palak singh - Member Since: May 2007
Hi

Thanks to both of you for the reply. But my problem is: my company's policy is that we encash Gross salary which comprises of Basic, HRA, Medical, Conveyance and Misc Allowance. As per my knowledge this is not the general trend followed for leave encashment. Also, if we encash full gross salary, the expenditure for company for leave encashment is huge. So I want to change it to encashing only the basic part of the salary. Please tell me what would be the pros and cons of this policy. Is it right to encash leave only on basic part of the gross salary??? And is it the last drawn basic???

Thanks
Palak

amuril - Member Since: Apr 2007
Dear Palak, Usually, Leave encashment for both government and non government sectors is done on GROSS SALARY (that includes last Basic + HRA + Transport Allowance + VDA / DA). Regards, Amrita

swastik73 - Member Since: Oct 2005
Dear Amrita,

Quote:
I just want to comment that the calculation of 15 days of paid leave enchashment done above is incorrect.
The above statement is not correct. It depends from Organisation to Organisation. In statutes, the number of working days is taken as 26, which I feel is correct in view of the weekly off and smaller the denominator greater the benefit. Tell me something as per your logic you should divided by 366 (Three Hundred Sixty Six) days in the Leap Years. Do you do it?

Dear Palak,

Before looking for the pros and cons you must first realise that changing the leave pay from gross to Basic will result in reduction of Annual Earnings of Employees. Which is something an Organisation cannot do.
The first step would be to compensate the loss in earning either by introducing a new allowance or clubbing it with an existing allowance.
The next step would be to pay all leave due to all employees on gross pay till date thereby bringing the leave balance to zero.
The new policy can be introduced after the above two steps are strictly adhered to and this will ensure that there is no legal complications in future.

Regards,
SC

Nutz - Member Since: Jun 2007
Hi Amrita :) Good that you are working in a reputed firm, so am I. We have been calculated this way all around the world for may years and till date no body has told me that we were wrong. Thanks for your input.

Hi SC :) I totally agree with you, and thanks for your support and input.

Hi Palak :) Hope you got it all clarified

Take care...

getbhavesh - Member Since: Feb 2007
Hi Palak.

All our friends in this forum have given you an optimal solution, though collectively. You were also asking about the pros and cons of regularising it.

The pros are all there, but the only con in legalising (or regularising) the leave encashment(by cheque) in your company is that according to a judgement passed as of 1st May 2005, LEAVE ECASHMENT will attract PF DEDUCTION from both sides i.e. 12% from employee's as well as employer's side.

As a HR Manager, I would suggest you to make this very clear to your employers. Look at it this way, the employees are anyways going to get the leave benefit, whether the employer pays by cash or cheque, but due to regularisation of this HEAD, the employer attracts an additional liability which turns out to be a recurring liability FROM THE DAY YOU ENFORE IT till time.

Best of luck.

Bhavesh B. Agrawal



Found This Useful? +Vote Up This Page Via Google.  

Why Vote? User validation is extremely important for good content to prosper.
Disclaimer: This network and the advice provided in good faith by our members only facilitates as a direction towards the actions necessary. The advice should be validated by proper consultation with a certified professional. The network or the members providing advice cannot be held liable for any consequences, under any circumstances.






Explore Topical Knowledge Areas

Interesting Relevant Discussions


DISCUSSSION STATISTICS


8
LIKES

13480
VIEWS

17
REPLIES

PLEASE KEEP YOUR CONDUCT PROFESSIONAL AND POLITE


3M Users, 100K+ Documents & 450K+ Discussions

Share »

Community Support & Professional Insights. Login or Register.
Email/Username     Password  

About Us - Advertise - Contact Us - RSS   On Google+  
All trademarks and copyrights held by respective owners. Member comments are owned by the poster.
Privacy Policy | Disclaimer | Terms Of Service
Facebook Page | Follow Us On Twitter | Linkedin Network