We have a system of providing 15 Earned Leaves, 7 Casual Leaves and 8 Medical Leaves to all our employees.
Since a long time, we have had a system of carrying over the entire un-availed leaves. We have been encashing the same as and when the employee puts in an application. This seems to have helped in employees not taking a leave.
We have found that some employees have accumulated the said leaves over 5-7 years. And the amount now is becoming quite large as the amount grows with increase in Basic.
My query is
1. We now plan to put a bar on the no. of leaves which can be carried over to next financial year (or employment year). Is it OK?
2. In the past we were deducting TDS on the said amount. The employees have put in a request that we book the Leave Amount under the head Staff Welfare so the TDS can be saved for them. Is it legally tenable?
If any could share "Best Practice" for the above matter.

From India, Delhi
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Please consider a stop-cap to the number of days for leaves encashment. Both Public and Private firm follows this policy of limiting the number of days. Consider encashment upto 22 days of leaves , on separation from the firm. Setting the specifications will help you manage the benefits.
Few private firms have no policy for encashment as they practise the 'forced leave policy' to lessen the stress level at work. The upside to this, is leave-planning and workforce management, where the Managers remain responsible to make their teams avail these leaves.

From India, Mumbai
Sharmila Das

Dear Mr. Anoop A,
I second Ms. (Cite Contribution) in [practise the 'forced leave policy' to lessen the stress level at work] -- The foremost reason is that you call it an Earned Leave.
Terms that specify leaves perse in sectors involve the encashment of Earned leave (EL) by the end of the calendar year to help overcome such situations
-Casual Leaves have to be taken by the employee in the calendar year orelse they would be lapsed by year end.
- Sick Leaves also are calculated as per the calendar year and If a person joins in the middle of the calendar year; sick leave will be calculated on pro-rata basis. Unutilized SL will be lapsed at the end of the year.
- Those who are in continuous service in the preceding 12 months (should work not less than 240 days) are eligible for 15 days E.L. during the subsequent year.If a person joins in the middle of the Calendar year, he is not eligible for Earn Leaves until completion of 12 months service. Leave can be encashed for 8 days in a year. However Company pays 15 days wages/salary in lieu of Earn leaves at the year end subject to availability of 15 days leave. Otherwise balance leave is allowed to encash
The TDS can be rebated by adding Sudexho Coupons to the employees as on meal vouchers or spending on grosseries. The amount canbe adjusted as per the employee level. Other allowances viz., HRA, Child education allowance (100-300/-) per mensem to the employee can be paid, Travel Allowance, Spl. Allowance in meeting office expenditure can be added too.
*LTA and Leave encashment also covers tax exempted benefits.

From India, Visakhapatnam

Hello AnoopA,
Further to what (Cite Contribution) & Sharmila Das have mentioned/suggested, pl note that this topic was discussed earlier in CiteHR--in a different context.
Pl see the Link below--this may give you more options/ideas.
All the Best.

From India, Hyderabad

Dear Anoop,

Please find the clause which you could include in the leave policy of your organisation on Leave accumulation and Leave Encashment: It could be modified as per your requirement:


An employee is allowed to accumulate maximum 60 days of Privilege leave. Leave over and above this limit will be en-cashed. For e.g.: If an employee has 68days on 31st December, then the leave balance on 1st January will show 60 days as balance plus the current years credit.


• Leave encashment for PL will be given for the days exceeding 60 days at the end of calendar year on request of the employee.

• Employee can apply for leave encashment once in a year in the month of December, the pay-out will happen along with March Salary.

• Leave encashment is calculated on basic salary and is taxable.

• Leave encashment will be done through the payroll process only.

Please write to me if your require the leave policy for reference. will mail it you.



From India, Bangalore
Thanks to (Cite Contribution), Sharmila Das, Tajsateesh and Santhoshi for very prompt reply.
I would like to have an idea what are the Best Practices in respect to encashment of Earned Leaves, Casual Leaves and Medical Leaves. Do the companies normally encash these (all or few)?

From India, Delhi
Sharmila Das

Dear Mr. Anoop,
If your employer has alloted 30 days of EL in the employees account, then if the leave accumulated by the employee is more than 30 days -- the excess leave is said to be encashed at the end of the calendar year which is credited to employees account in the month of march. Eg: If an employee has 40 days leave accumulated in his account, 40 leaves - 30 E.L = 10 days leave has to be encashed.
Leave Enchashment = Basic Salary divided by 26 x No. of days to be encashed

From India, Visakhapatnam

Mr Anoop Is there any act or rule that we calculate for 26 days only as you mentioned in the formula. why don’t we follow as 30 days. Can u please explain Regards Prasad
From India, Hyderabad
Dear V V S D Prasad, The issue of 26 days and 30 days has been extensively discussed on this forum. Guess a little research will be a great help. Regards Anoop Aggarwal
From India, Delhi

Dear Anoop Yes. As you said i have searched so many threads,there is lot discussions on this issue. But I am not getting clarity on how to calculate the el encashment. Pls support me on this issue
From India, Hyderabad

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