Legal, Training
Shalu Panwar
Assistant Manager - Hr
Savitha M S
Sr H R Executive
+8 Others

DEAR SIR Our company gives Leave encashment to the employees .... My question is that should we deduct E.S.I & P.F on leave encashment provided to employees ?
27th April 2011 From India, Bangalore
Dear jadhavrahul,
You need not pay contributions on leave encashment under both the acts.
For ESI-
(22) “wages” means all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes 35[any payment to an employee in respect of any period of authorised leave, lock out, strike which is not illegal or lay-off and] other additional remuneration, if any, [paid at intervals not exceeding two months], but does not include—
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling con¬cession;
(c) any sum paid to the person employed to defray special ex¬penses entailed on him by the nature of his employment; or
(d) any gratuity payable on discharge.
For EPF,
Refer the attached files
Excellent HR Services,
29th April 2011 From India, Selam

Attached Files
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File Type: pdf Encash_EL.pdf (31.8 KB, 5382 views)
File Type: doc HC MAD 07 LEAVE ENCASHMENT NO WAGES.doc (64.5 KB, 2328 views)
File Type: doc PF deduction on leave encashment.doc (37.5 KB, 3092 views)

Sharing practical not theoretical exp. in general language Leave encashment is paid on annual basis and any amount which is not paid on monthly basis doestn't comes under any deductions also this is not a salary /wages so no deduction is to be made. But You can make deductions(Only ESIC not PF) on Incentives if it's paid on monthly basis since the payments gap is less than 3 months. PF deductions are made only on Basic salary and not on any other benefits provided to employee.
Any Corrections towards this are welcome.
29th April 2011 From India, Calcutta
Dear Yashoda,
Here I am trying to give some practical experience in encashment of leave.
Based on the Company Policy/Standing Orders you can take either Basic+DA or total components.
For both cases you have to divide it by 30 to arrive encashment for one day.
Then you can multiple it with the no of days to be en- cashed. Please note that this encashment will attract IT as the case may be.
Hope it is clear.
Excellent HR Services,
29th April 2011 From India, Selam
Hi Mr. Sethupathy thanks for the information. Some how our leave encashment formula is same as you mentioned .Soon I will get back to you on this topic.
29th April 2011 From India, Calcutta
My company is a BPO company, and we had a annual limit of 15 PL per year. My query is that if I resign the company say after 4 years what would be the PL balance ( in case i had not taken any single PL in 4 years), will the PL payable to me is 15*4 = 60 days or it would be 15 PL's only. As per my company policy at the end of FY my previous PL will get lapsed. Is it correct , can my company do that.
Please revert as soon as possible. It is a bit confusing ( why should an employee suffer due to this company policy) And if this can be done can you please provide any document for this. My company is under Delhi Shop and establishment act.
11th July 2012 From India, Delhi
Dear HR Colleagues,
Please let me know how leave encashment is being calculated? Whether it is on Gross Salary or Take Home Salary?
P K Sudarsan
Senior Executive HR

24th June 2014 From India, Chennai
Subject - Deduction of PF & ESI on leave with wages?
Pls ignore earlier Thread.
Dear Sir,
Our company gives Leave with wages @ 6% to the employees .... My question is that should we deduct E.S.I & P.F on leave with wages provided to employees ?
24th July 2014 From United States, Southfield
My Co./Factory is giving leaves from April-March (F.Y.)
They are paying leave encasement every year in April.
Do you thing that they have to pay PF ESIC on leave encasement also?
For total employees offering only 15 days leave is it correct as per low?
Paid holidays are separate ant it will declared every year Jan.
Please guide.
18th February 2015 From India, Mumbai
Dear Sir,
i am Paying Leave encashment on monthly basis for contract employees can i deduct esic amount on leave encashment it is applicable or not suggest me. my leave incashment formula is (Basic+DA*5%)
26th May 2016 From India, Mumbai
Dear Sir, What if, If the Earned leave under the Factories Act is being adjusted on absent of the employee, do we have to need to pay the EPF and ESIC contribution on leave??
4th July 2016 From India, Indore
Dear Sir/Mam, I want to know, at pay Leave encasement time we deduct ESIC or not. It is necessary deduct ESIC from Leave encasement.
13th September 2016 From India, New%20Delhi
Dear All,
As per the order of the Hon'ble Supreme Court of India, EPF contributions not be paid on leave encashment, my question is if the daily wages worker has worked for 25 days and has been given 2 days leave encashment against his absenteeism, in this case weather contribution on EPF and ESIC is to be paid or not.
Also if the leave is being paid on monthly basis to the employee, though he does not require it, what would be the circumstances for EPF and ESIC.
As per my understanding Earned leave under the Factory Act or in any Act is the discretion of the worker who has earned it, employer can not impose payment of leave with his salary on monthly basis.
Request all seniors and learned council to explain each point.
Piyush Jain
Consultant & Advocate Bhopal M.P.
15th September 2016 From India, Indore
Dear All,
In concern to Leave Encashment, we are clearing the amount in every six months, would like to know if it covers under the ESI deduction or not. If yes, then we'll start the encashment on annual basis, hope then ESI deduction will not be applicable.
Kindly request to please guide on the same.
Thanking you all in anticipation
10th April 2017 From India, New Delhi
Need a clarity for ESIC related .. tried to look at the thread but dint got it resolved. Suppose if an Employee leaves on 1st, and she had 10 leave balance, and as a full and final settlement , she has got 1 day + 10 days ( leaves ) = 3000 Rs example. so now while filing EsIC in portal, i enter the wages ( Gross), what should be the days.. should it be 1 or should it be 11. but please note her last working day was 1st only...
Appreciate the response
5th July 2017 From India, Mysore
Hi Sethupathy,
I feel that the calculation of Leave encashment, we have to divide the Basic + DA by 26 and not by 30 days. If it is wrong, please correct me.
2nd December 2017 From India, Chennai
Dear Genius HR people,
Is there any new rule or notification for leave encashment ESI deduction? we have to deduct ESI for Leave encashment? kindly suggest.
11th January 2019 From India, Bangalore
If leave encashment is being paid based on not less than quarterly then no need to deduct to ESI on such amount.
11th January 2019 From India, Pune
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