Statutory Compliance
Generalistic Role
+4 Others

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Dear All,

Please tell me how to encash the leave of the employees:

Currently we are encashing the balance leave at the end of the financial year on the basis of Basic Salary. But we have received some queries from the employees that the leave encashment should be on the basis of Gross salary.

Kindly advice in your company on what basis you are providing leave encashment facility to the employees.

Thanks & Regards,

An employee is paid all the salary (Basic pay) and all other emoluments e.g. DA, HRA, etc. forming part of Gross salary during the period he proceeds on leave and during the leave period, employee remain getting full salary. On the same analogy when he gets his leave encashed he should be paid the gross emoluments to which he is entitled. Basic is Pay only and not salary as such the gross salary should be paid for leave encashment and not thee basic pay only.
To sum up, the employee should get, the same amount for leave encashment as he would have got if he proceeds on leave/avails his leave.
TR Chhabria

Dear supriya.penkar, Earn leave encashment is company policy dependent. Both options (basic & gross) are possible. regards,
Its a simple calculation (Basic + DA)/30 x no of leaves balance = encashment amount.
But just check that your leave calender is same as financial calender otherwise you can encash in January salary subject to Income Tax calculations.

Calender year is always better to maintain leave records though some companies maintain it as per fiscal year.It depends on company policy.Usually it is as per calender year in most of the companies.
Dear KVR,
For any statutory (Except ESIC) & legal calculations like bonus etc. Basic + DA is used, to avoid confusion nowadays Basic comprises of Basic + DA,
Well for HR placement calender year is more suggested than fiscal because it is easier to maintain records but if you are maintaining Leave Register you have to show records for Privilege Leave carry-forwarded or encashed make it sure they are not lapsed, Casual u can encash as per Management Decision, also it is suggested if you encashing the leaves you can pay with the salary of January of every year.

Dear friend,
Leave encashment normally falls on the company policy there is no law regarding leave encashment while in service.But your query is very good and one must get the normal wages against the leave encashment which he could have get at the time of on leave.
Hence for information
MN Wakodkar

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