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Dear All,
We have this leave encashment policy with us. This is the first time that we have taken up this policy to reduce the absentiesm. I wanted to know whether the leave encashment is calculated on the basic of the salary or on the gross amount.
Thanks & regards,

From India, Pune

We also have encashment of leaves for this we use following formula:
W = Average number of working days = 22
N = Number of leaves to be encashed
Y = (Yearly CTC) / 12
E = Encashment (Rs)
E = (N * Y) / 22;

Hope this will help you.


From India, Mumbai
Venkat HR
Dear Team,
Below is a sample calculation as per Meghana’s formula:
Assuming the total yearly CTC of a person is Rs.600000/- So as per the formula Y= Rs.600000/12= Rs.50000/-
Assuming the number of leaves to be encashed is 22 (which is referrred as N)
So as per the formula the Encashment (E) is equal to (22*50000)/22, which is Rs.50000 (but here we end up with gross monthly salary)
But Rajeev Verma's statment says that it not based on the gross salary, but as per the given formula, we have got the gross salary basis, so got confused - So can any of you in the team tell us which is right? Also quote examples please

From India, Madras

Leave encashment is usually done on Basic component only but few organizations follow gross salary also for encashment. There are no rules set whether it is done on basic or on gross.
Its done based on the policy of the organization. So both are correct.

From India, New Delhi

Leave enchashment for Annual Leave/PL OR Earned Leave is on Basic and as per Factory Act,1948, complusory.
From India, Ahmadabad
lokesh acharya
Hi Friends, for leave encashment we have to take only basic salary. Rgds Lokesh Acharya Sr.HR Executive Bangalore
From India

Hi Generally Leave encashment is being made by various organizations on the basis of basic salary only. Regards, Sivadasan
From India, Udaipur
Rakesh Dave

Privilege leave Salary is on basic Salary.( Formula Basic* Number of lave Encash / 26 days). Rakesh Dave
From India, Mumbai

Hi Friends,
As per Factory Act Leave Encashment is computed on the basis of Basic Salary + Dearness Allowances. But most of the companies do not have the Salary Head of Dearness Allowances, so it is calculated only on Basic Salary.
Bhanu Pratap Singh

From India, Pune
leave encashment is based on truly on the basic + dA ,,,but the calculation of the same can also be done on the basis of gross salary provided that it is mentioned in the organozational policies in written and approved by competent authority...
Rahul joshi

From India, Jaipur
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