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Sriharsha
Sr. Executive - Hr
Rajeev Verma
Hr Professional
Hr Manager
Suja_nm
Hr Professional
Kartheka
Payroll, Training & Development, Employee
Rajpal
Hr Consultant
Suhritaguin
Working As Hr Exe.
Rakesh Dave
HR_HYD
Human Resources, Sap - Hr
RAKESH DUBEY ONLY
Working With Raymond's Ngo
Lokesh Acharya
Sr.hr Executive
Marimuthu
G.Srinivasan
Sr Manager Finance&commercial
Deepakraj
Service
+3 Others

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,
Suhrita
16th October 2008 From India, Pune
Hi,
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;

Thanks
Meghana
16th October 2008 From India, Mumbai
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
Thanks,
Venkat
16th October 2008 From India, Madras
Venkat,
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.
16th October 2008 From India, New Delhi
Leave enchashment for Annual Leave/PL OR Earned Leave is on Basic and as per Factory Act,1948, complusory.
Hi Friends, for leave encashment we have to take only basic salary. Rgds Lokesh Acharya Sr.HR Executive Bangalore
16th October 2008 From India
Hi Generally Leave encashment is being made by various organizations on the basis of basic salary only. Regards, Sivadasan
16th October 2008 From India, Udaipur
Privilege leave Salary is on basic Salary.( Formula Basic* Number of lave Encash / 26 days). Rakesh Dave
16th October 2008 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.
Regards
Bhanu Pratap Singh
16th October 2008 From India, Pune
HI
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
16th October 2008 From India, Jaipur
Dear All,
As per rule, leave should be encashed on basic salary. That is the minimum limit. Rest depend on the company policy.
Every employee who has been confirmed or completed probiation period entitle for 1 EL on each 20 working days. So minimum EL should be 14 in a year. Rest depend on the company policy.
Calculation = (Basic Salary/26)*No of EL - ESI
example = (3500/26)*14-1.75% = 1852
Rgds/Jitender
16th October 2008 From India, New Delhi
Suppose basic of a person is 10000 per month so now if 15 leaves are to be encashed then it is calculated as 10000*12/365*15 or pls show me some eg. as to how to calculate
16th October 2008 From India, Pune
It is calculated as (10000/26)*15
when you divide the basic component by 26, you get the basic equivalent for one day. So 385 is one day's basic pay. Now multiply it by the number of days to be encashed. i.e
385*15=5775
16th October 2008 From India, New Delhi
As an hr i would like to give my view.please let me know whether i am correct or wrong.
leave encashment is done of paid leaves or earn leaves i.e PL or EL.
if i take one day leave,then i am paid one day salary i.e from my gross salary.
so it is simple that it calculated from gross.
For example:
x's gross = 7500/-
then one day salary = 7500/30 = 250/-
leaves remaining at the end of the year = 12 leaves
leave encashment amount = 12*250 = 3000/-
hoping that i am able to clear a bit of it.
regards
anand
16th October 2008 From India, Bharat

The formula would be

Basic Salary/26 days (no. of working days Per month it may vary 22 days or 26 days) mutiply with no.of days to be en-cashed.

Eg: Basic = 7,000
No. days to be encashed = 24

Then, leave encashment = 7,000/26 x 24 = 6,462.00
16th October 2008 From India, Srikakulam
Hi ,
I do agree with pratima . Leave encahment can be done in both of the ways whichever suits to the company . Either on (Basic+DA) or on gross. In our organisation we follow Leave encashment on (Basic+DA) , so that they enjoy their leaves & be more productive afterall they are not machines.suggestions are appreciable.
Regards,
Ashfaque
17th October 2008 From India, Gurgaon
Dear Team
an employee apply for the cl for two days in between that two days if declared holiday comes whether employee has to give leave application for that or its declared holiday only?
Regards
Manju
17th October 2008 From India, Mumbai
Hear as per my knowledge only the PL Leaves will be encashed not Sick & Casual Leave. Leave enachment is calculated is as follows
1. Total Basic Salary + DA (pm)
2. Multiply the same * 12 (for year)
3. Divide the amoun amount x 365 days (you will get one day salary)
4. One salary x no of PL Balance
Example
1. Basic+DA is = Rs. 10000
2. Basic+Da * 12 months = Rs. 1,20,000/-
3. One Year Basic Salary / 365 days = 328.77
4. One Day Salary * No of Leave Balance (PL) = Rs. 7,232.88
For calculation is have taken 22 as Leave Balance is there and the same has to be payable
Thanks & regards
Ravi

17th October 2008 From India, Bangalore
Hear as per my knowledge only the PL Leaves will be encashed not Sick & Casual Leave. Leave enachment is calculated is as follows
1. Total Basic Salary + DA (pm)
2. Multiply the same * 12 (for year)
3. Divide the amoun amount x 365 days (you will get one day salary)
4. One salary x no of PL Balance
Example
1. Basic+DA is = Rs. 10000
2. Basic+Da * 12 months = Rs. 1,20,000/-
3. One Year Basic Salary / 365 days = 328.77
4. One Day Salary * No of Leave Balance (PL) = Rs. 7,232.88
For calculation is have taken 22 as Leave Balance is there and the same has to be payable
Thanks & regards
Ravi

17th October 2008 From India, Bangalore
Dear Friends,
As per the Factories Act, the leave encashment has to be on Basic+D.A., which is minimum as per the Statutory requirement, but if any employer is paying more than the statutory requirement, than it has no boundation, an employer can always give the benefit more than the minimum prescribed under the Act.
17th October 2008 From India, Delhi
Dear Manju,
It is again depends on the organization policy. In any policy if it is mentioned that the intermediate saturdays / sundays / declared holidays are excluded from the leave taken then you donot have to deduct them from the account. If it is not mentioned anywhere in the policy then yes u have to deduct those leave also from the employees leave account.
17th October 2008 From India, New Delhi
Dear all.
As per the factories act 1948 leave calculation should be based on Basic+da here i will caluculate one Ex for your clarification.
Basic+ Da = 10000
Encashment leave days = 15 days
10000/26*15 days = 5769 Rs.
Thanks & Regards
yogeesh
17th October 2008 From India, Bangalore
Dear All Help me out in settling leave encashment its new concept fro me Kindly let me the formula
17th October 2008 From India, Hyderabad
Hi,
We have to follow as per company rules, some companies calculate on Gross, but max companies calculate on Basic+DA. In my company we encash once in 2yrs. Encashment and calculations are different from company to company.
with regards,
Ramesh.V
17th October 2008 From India, Hyderabad
Hi all,
I had recently joined a IT company having a strenght of around 150 employees.
We do not follow any Leave policy here.
In a year we only 15 days of leave is given to the employees and they are enchased at the end of the FY (April to March). And if an employee take any leave in a month his/ her salary is deducted in that particular month.
As an HR i feel this should be discontinued and we should come up with some Leave Policy. But their other HOD who say that their is no need of Leave Policy or giving leave pro rata wise as it requires to much of man hours to maintain the record, where currently we encash the eligiblity leave to all at the end.
Kindly guide me as what leave policy is followed now is ok. I have dediced to start the same in the new f Year. Also it is an growing organisation.
Kirti
17th October 2008 From China, Qinhuangdao
Can u pls let me knw the section/notification which allow us to paid it on Basic+DA. regds, Lalit
17th October 2008 From India
Dear all,
Here i am giving my opinon, if i wrong please correct me.
According to the factories act Rule 84 to 88(i am not clear on section, please check it out) EL encashment needs to be calculated by basic da and all other allowance including food allowance.
But in order to control the cost all the companies are calculating by basic + da.since the employees work is very important we wont give permission for leave normally. So definetely balance of leaves will be more (may be 36 days,accumulations can be done upto 36days)
This is what the reason all companies are calculating by basic +da.
NB: This was discussed in my company HR meeting and the management agreed to calculate by gross salary.
Regards
S. Marimuthu
17th October 2008 From India, Madras
Hello, It varies between organizations, depending on the company policy. Leae encashment can be on basic salary or on monthly gross. Neither of them is wrong.
17th October 2008 From India, Bangalore
Hi In our concern Leave encashment is calculated on the basic salary and PF is also applicable on the same. Also it comes under the taxable income to the employee.
17th October 2008 From India, Madras
Hi We can deduct the P.F. from employee against leave encashment.? As per our previous practice we are deducting the Employee Contribution from Leave Encashment. Regards Rakesh Dubey
17th October 2008 From India, Raipur
hai all i think it is better to caliculate on gross because if we given LOP to a employee we deducted his salary based on gross so in encashment case we caliculate the amount on gross. if we caliculated based on gross employee will get benifit,if we caliculated based on Basic employeer will get benifit(pay low amount to employee).good employeer always looking for employee benifit so we caliculate based on gross. formule of this is gross salary*no of days encashed/no of days(26 or 30) based on no of days we run the payroll
17th October 2008 From India, Visakhapatnam
Hi,

Having gone through views of many , it tempts me to bring to you one more dimension . We are talking about earned leave , which means after putting in service during a calender year provided one is confirmed , he / she earned leave to be enjoyed in terms of rules govering Leave Policy . Normally Leave policy does state about leave enjoyment as well as encashment . Different statue namely Factories Act, Standing Orders of each state , Shop and Establishment Act etc. get attracted depending upon class of employees - such as worker , staff and others . I shall definitely provided more insight into these provision after I return from my tour .

I wish to now attract your attention to a fact that earned leave when enjoyed one gets full payment on monthly gross but on encashing it everyone mentions about Basic in some case , in others , Basic + DA and while many speak about Gross Monthly . Please review this position and then proceed further about it being right or wrong .I shall extend vital points say in another 15 days after my return.

Wish you all best of spirits and warm regards to all members.

Rajpal
17th October 2008 From India, Mumbai
Pf is not attracted on the Leave emcashment as per the latest SC ruling, copy of the same is enclosed herewith.
18th October 2008 From India, Delhi

Attached Files
 Membership is required for download. Create An Account First LEAVE ENCASHMENT NOT INCLUDED IN WAGES FOR P. F. CALCULATION.pdf (32.5 KB, 177 views)

Hi Rakesh,
As per order of supreme court, It is not required to deduct P.F. contribution on Leave Encashment amount right now.The amount which was already deposited, will not refund.You can ask to P.F. department for further settlement in your future P.F.deposit.
Deepak Raj
New Delhi
9868941534
18th October 2008
Dear Deepak, But As per Factory Act it should be calculated on Basic+DA including all other allownces execpt Bonus & Pension. If you have any notification/judgement copy, pls send. regds, Lalit
18th October 2008 From India
Dear All, Just clarify me.. on the above topic.. As per my experience & knowledge leave encashment calculated on Basic Salary and leaves to be taken of CL & PL & not SL(Sick leave)..is it correct... pls help me out on the same..thnx & regds,khursheed
ps reply in My id :
19th October 2008 From India, Mumbai
There are many ways it is decided. In my first employment it was calculated on Basic +DA and 15% premium was given and at the same time one cannot encash more than 2weeks this is to ensure that people go on leave for some days. Only at the time of resignation or Retirement entire leave balance is considered for encashment.
20th October 2008
Hi surhita, Hope this helps u, We calculate leave encashment by : Basic x No. of days PL balance / 26. Here we donot encash SL and Cl. Only PL can be encashed accumulated upto 90 days. Thanks, Smita
20th October 2008 From India, Pune
Funny discussion. every body know that EL will be encashed only on basic, then why we all try to gyrate this matter. Rgds/Jitender
21st October 2008 From India, New Delhi
Dear All,
Please be infomed you all, Leave encasment as per Factories act 1948 and Shops and commerical act we have to calculate on baiss of Graoss earning, most of the compnies are following Baisc+VDA
Actually Bais + VDa we have to consider only while Gratuity working,
For Example
Employee has gone for a leave then we are deducting from his Gross earning, ?? No
we are deduction his full earnings, therefore if you all can read out the act then you will understand it, as per as act considered leave encashment is caluclated on basis gross wages, so kindly inform the same to your respective industry,
Thanking you
Yogeesh
18th May 2013 From India, Bangalore
Dear All,
Please Note, Leave Encashment is done on the basis of Gross salary not the Basic +Da
Kindly go through the New notification of Factroies act 1947 and Companies act 1956, a
Yes genererally we are practising Calculating on the Basis of Basic, some companies Basic+DA actually this wrong, if we read the leave encashment procedure as per the act it is stated, on the basis of Gross components, which is encashed when employee is leaving the organization, due to resignation, etc,
Request all to refer once Base act so that, you will undersatnd more clarity on this.
Thanking You
Yogeesh S. T
9th November 2013 From India, Bangalore
Dear All
In our company we are calculated EL on basic salary but as per factory it is calculated on basic salary + DA. But DA is not the component of Salary in our factory. So we are calculating EL as basic salary suppose = 7000/30* balance EL
9th November 2013 From India, Bangalore

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