Labour Law & Hr Consultant
Savings Thru Mutual Funds
Srinath Sai Ram
Hr Manager
Human Resources Officer

Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
Is there any act stating that leave encashment in India has to be on gross wages? Is any such act in discussion in the parliament?
From India, New Delhi
Dear Kohsheen Please peruse The factories Act 1948 & relevant State Rules & respective Sate Shops & Commercial Establishments Act & Rules
From India, New Delhi
In my country leave encashment is based on the basic salary/wages. In a year one is entitled to 12 monthly wages given that your pay is based on a month. In other countries there is what is referred to as the 13th cheque which is basically a bonus at end of year. If you base leave encashment/commutation on gross pay then you may find yourself paying housing and transport allowances more than 12 times/months in a year.
I do not know about the laws related to such in India but common practice would be that benefits such as termination, retirement, leave, overtime are calculated based on basic pay unless otherwise specifically stated in your employment agreement or Labour laws.

From Mauritius, undefined
If ADA is paid along with basic salary, both Basic and ADA or DA should be calculated for payment towards leave Salary. Allowances need not be considered for calculation . A Basic Salary cannot be reduced from a person's salary in his career in the organization, but allowances can vary.
Basic Salary and ADA are calculated for PF, Bonus and Ex-Gratia payments. Not other allowances which are included in Gross Salary.Refer also Wages Act for more clarity.

From United Kingdom, Oxford
Dear friends,
For the sake of a perspicacious analysis and a free discussion on the subject-matter, I think that let us first keep aside the laws relating to wages and compensation for the inclusion or exclusion of certain allowances in the total pay-outs to an employee by the employer under the contract of employment is dependent mostly upon the purpose/objective of such laws. Wages/salary to an employee is the total value of the monetary consideration payable for his work/service. Bifurcation of this wages/salary into basic and allowances is an administrative exercise to facilitate smooth mobilisation of labor as well as reduction in the consequential indirect financial commitment of the employer. Therefore, allowances form an integral part of the wages/salary structure unless they are in the form of compensation to the expenses defrayed by the employee because of the special nature of his duty/job.
Coming to encashment of leave, it is a concession conferred upon the employee for not availing of certain type of statutory leave that can be accumulated to a certain limit either periodically by organizational practice/ convention or on the termination of his employment. As far as I am aware of, no Indian Labor Law provides for periodical surrender of leave for cash benefit though the cash payment of the unavailed portion of certain leave is made compulsory on the termination of employment. Thus, by foregoing his leave, the employee helps the continuous work flow of the employer who otherwise has to engage a substitute. Therefore, in case of surrender of unavailed portion of leave at his credit, the employee is entitled to all the heads of his salary components other than those in the nature of specific allowances which could be excluded if he is actually absent like travelling, lunch/tiffin, heat allowances as if had he been present for work.

From India, Salem
This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2020 Cite.Co™