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Dear Reader,
I have following queries:
1.In my Company , Unions demand to divide the monthly salary by 26 to find out per day salary. We divide by 30 or 31 days . Which is correct?.
2. For leave encashment, the Management give BASIC+ DA which forms only 56% of gross salary. 44% is allowances which we exclude from salary calculation for above purpose. But when we deduct salary due to LOSS OF PAY Leave, we deduct salary of all allowances and BASIC+ DA. Unions demand the leave encashment salary based on BASIC+ DA+ ALLOWANCES. Which is correct?
Kindly reply.

From India, Palakkad
1. For Workers the wages is to be divided by excluding weekly off and for staff salary is divided by 30 or 31 days.
For Example:-
1. For the month April 13 - 30 days Weekly off (Sun) -4 Payable days -26
2. For the month May 13- 31 days Weekly off (Sun)- 4 Payable days -27
So the wages is to be divided by 26 or either by 27 days.
2.For your second query is no support of law regarding leave encashment. Itís totally depend on management to encash the leave on Bas+Da or Bas+Da+Allowances.

From India, Nasik
Dear Antukd, Shri Ganesh has correctly explained the position. A worker earns wages for the time he has worked. That is why a proportionate deduction is made for the period of absence counted in hours/minutes. Payment of wages Act authorises such deduction. But as regards salaried class, there is no deuction for lesser absence, the minimum unit is half day and lesser absence is condoned. The principle of 26 days is equal to a month is applicable for workmen who are paid wages and 30/31 days principle applies to salaried category like office staff. Following the directive from government audit, the leave encashment formula in PSUs which were earlier operating on 26 days principle have been now changed to 30 days and is made applicable to all category. The matter is under challenge before the High Court, hence a final word cannot be said. As regards leave encashment, the compensation is only Basic +DA and the allowances are excluded. In most of the cases the allowances are actually linked to performance of some duty, like conveyance is for coming on duty, washing allowance is for keeping the uniform/dress in presentable condition while performing duty, newspaper allowance is for purchasing the newspapers, none of these conditions are met while encashing leave, hence it is not payable.


From India, Bhopal
Very smart union you have..!

1. Monthly salary to e calculated on the basis of number of days in each month. It varies from month to month as it has different number of days in each months. As per labour acts, only basic+DA are the mandatory allowances to be given to employees. but in fact, salary includes other allowances also which makes the gross quite bigger than the minimum wages. Salary means the payment made towards work done in the period of one month. A month includes normal working days and declared weekly off like Sundays and other declared holidays. It means those declared holidays are paid holidays. While we are paying for whole 30 days, then while calculating per days salary we should divide the gross into the number of days we pay in a month and not for the number of days an employee works.

2. Again as per labour laws minimum wages is the mandatory thing in computing the salary. So the way you are following to calculating the Earned Leave en-cash is right. Its not an employer's obligation to calculate it for the gross salary. It depends on the management as to how it tells to do it.

Further please check with the seniors.

From India, Bangalore
Well, i think it is really tough situation to resolve. Actually, the workers are thinking from their own perspective and asking for the same.
From India, Lucknow
As per Sec.4Sub. Sec.(2)of the above Act, explain the calculation of 15 days wages per year for monthly rated employee.Monthly rate of wages last drawn divided by 26 and multiply the quotient by 15.
From India, Jamshedpur
Ours is a PSU - we do it basic+DA+Special Basic (Personal pay) divided by 26
From India, Kolkata

There is a Supreme Court judgement that says per day salary is to be computed on the basis of a 26 working day month.

That apart, there is a justification for both of the methods, 26 and 30 days.

1. 26 days rule : payment of wages act, minimum wages act, both require you to pay for weekly off. Since majority if the workers get their salary in days worked (no paid holiday given), the minimum wages notifications include weeks offs in the rate by dividing by 26 working days. That makes the computation of wages transparent and easier for workers to understand

2. 30 day rule : if you are taking a 30 - 31 days month, then you must include all weekly off as present and working in computation if wages. If you do not do that, you will violate min wages law of providing paid weekly of off.

So in effect, there will be no difference in paying on 26 working days or 31 days including weekly off.

In terms of mathematical computation, 26 days working will save you some money. What happens in reality is not that you are paying for working days. You are actually deducting absent days. For that purpose, deduction on 26 days rule allows you to deduct more.

Eg. If a worker gets salary of 6000.

Absent 3 days

Method 1 : daily rate : 6000/26 : 230.75

Absent deduction : 692.3

Payable : 5307

Method 2 : daily rate : 6000 / 30 : 200

Absent deduction : 600

Payable : 5400

Most unions do not realise this.

Unless of course, you have not been paying for weekly off, which is a non compliance

Hope is all means, do agree to the union requests

From India, Mumbai
While for gratuity purpose the Act itself provide for dividing by 26. Whereas for other purposes it is better you should go by what is provided for in your Standing Order or agreement with the Union.

From India, Bangalore
Factories act makes it compulsory to give one paid weekly off after 6 days working and no worker should work more than 10 days without a off.
my logic is if we compute salary based on 26 days that means we are excluding weekly offs (not paying for weekly off) that means it is non compliance.
if we pay for 30 days then that means we are paying for weekly offs. and that is 100 per cent compliance.
for gratuity we should consider 26 days in a month.
seniors may correct me if it is wrong.

From India, Mumbai

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