Srinivas Nednurkar
Hr Operations
Recruitment, Induction, Handling Grievances,
Management Student
Hr Professional
Self Employed
+2 Others

Dear All,
I have a query pertaining to "leave enchashment procedure":
Nomally companies, follow below formula while calculating the amout of leave encashment:
Leave Enchasment = Basic Pay / 30 * No.leaves for encashment
But, under the 'various labour acts' we normally took 26 days to calculate a month. Therefore my query to you is:
1. Is there any guidlines/rule defind under 'factories act' or 'any other act' for the calculation of leave encashment amout?
2. What is right procedure, practices you follow?
I hope group members would like to put their insight into this...
Thanks in advance..
Manish Phansalkar
18th January 2007 From India, Nasik
Dear Mr. Manish,
The practice which we are following for calculating leave encashment is as under:
For Staff
(Basic /30 + DA/26) * No. of leaves
For Workers
(Basic /26 + DA/26) * No. of leaves
The reason for calculating leaves differently is because staff are paid monthly salary while workers are paid daily wages.
If still any query revert back.
Santosh Iyer

22nd January 2007 From India, Pune
Hi, It is clearly mentioned in chapter "Annual leave with wages"of The Factories Act,1948. The Formula for calculating the Cash value of EL is (Basic Pay + DA)*Total no. of available EL/26. Abhishek
23rd January 2007 From India, Delhi
Under the Factories Act calculation for leave shallbe divided by 26 days and payment should be on avg daily earnings i.e. not only Basic +DA (Full day salary). Further Factories Act does not show any difference between leaves calculation to workman/manager as Factory Act is applicable to Manager. Pl read the definition of employee under the Factory Act and also the defnition of wages.
ak malhotra
29th September 2008 From India, Guwahati
If a person has 90 days of leave on which salary is this leave encashment done. Is it on prevailing salary or the back bvasic salary
17th February 2009 From India, Mumbai
Dear Mr. Santosh,
I've a query ; Can you please tell me whether the salary for workers is also calculated for 26 days even though he is present for 30 days?
Thanks and regards,

2nd July 2010 From India, Mumbai
hi chitra as per factory act a person is eligible for an rest day after 6 days of work. so definitely rest are there. if he work full 30 days month and he have 4 rest in that month the attendance will be 26 duty + 4 rest and rest 4 day duty is calculated as his Overtime . which will be calculated as double O.T
31st July 2010 From India, Angul
Factories act, shop and establishment act and payment of wages act are quite clear for leave encashment after separation from service (whatever reason)
Wage is defined as total amount including ALL alowances apart from dearness allowance. The number of days has to be less than 30 days as holidays/ days not worked needs to be excluded.
Employees are referred as workers. Wage includes even foodgrain amount ! So basic salary is not recognised by the act.
Leave encashment is to be done per wages (total per day and average for last few months)
1st April 2016 From India, undefined
Hi Abhishekk123, Can you provide us the documentation for your confirmation on Leave Encashment. Regards, Srinivas
1st April 2016 From India, Hyderabad
Is there any specific law/Act/Clause/Section which defines the mandatory of paying Leave Encashment to employees.
Some employer are not willing to pay leave encashment nor Carry Forward to next year.
9th August 2018 From India, Bengaluru
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