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Please help understand if the leave encashment during separation should be calculated on Gross salary or basic salary.
Hi During separation the leaves are calculated on the gross and not basic. It is not the same as encashment during your period of employment. Thanks and Regards
Dear Aks Would appreciate, if you can support your calcification here above with legal provisions etc. Shailesh Parikh 99 98 97 10 65 Vadodara
Dear Friends,
Leave encashments are calculated on basic salary only. It is at the discretion of the employer to do it on Gross salary too; however provisions and acturials for leave encasement are done on the assumption that leaves at the time of separation will be encashed on basic salary alone.
If there is any circular or law that says Leave encashment at the time of exit should happen on Gross salary, please share.

Leave and holidays with wages and Insurance Scheme for Employees
30. Leave :- (1) Every employee who has served for a period of two hundred and
forty days or more during a continuous period of twelve months in any establishment
shall be entitled during the subsequent period of twelve months, to leave with wages
for period of fifteen days, provided that such leave with wages may be accumulated
upto a maximum period of sixty days.
Every employee who has served for a period of not less than two hundred and
forty days during a continuous period of twelve months in any establishment shall be
entitled for encashment of eight days of leave with wages that has accrued to him
under sub section (1) during the subsequent period of twelve months. The employer
shall pay to the employee the wages for the leave so encashed by the employee within
a week of receipt of the application for such encashment from the employee
Leave with wages is supposed to be full salary and not basic unless it is specified as such.
Hope this answers Mr Parikh. This is taken from Shops and Establishments Act of AP and even Telangana follows the above. Page 16/17 of the Act.
Thanks and Regards

Dear Aks17,
please check the definition of wages in section 2 of the same act. Wages doesnt include any allowance, reimbursement or other benefits; while gross salary comprises of allowances, reimbursements, OT etc.
Hope this clarifies.

The points mentioned by you pertains to the work actually done - OT, any other allowance etc during a particular period. If you calculate that it becomes double payment for the same work, which is not the way it is intended to be.
Also where does it mention that the leave has to be calculated on the basic salary?
Gross salary may include allowances but that does not make excluding them into basic salary. Salaries for encashment includes all that is payable as if an employee works under normal circumstances.
You do not get OT and/or reimbursement under normal circumstances, it is job/work specific.
Thanks and Regards

As i mentioned earlier that usually leave encashment is done on Basic (+da if it applies) salary ; however it is at the discretion of employer to do it on gross too. However going by the definition of wages, section 2(23).e(v),(vii) of the aforesaid act mentions that wages doesnt include any special allowances or house rent allowance. Hence going by the law; leave encashment can't be done gross if it includes special allowance or HRA. yet the law doesnt forbid employers on passing additional benefit to the employees.

Leave Encashment is only eligible to Leave which are Paid named as Earned Leave/Privilege Leave/Paid Leave.
The amount should be calculated on Gross Salary, as per the Shop & Establishment. It is clearly mentioned that it is calculated on full wages and wages definition is defined as Minimum Wages Act, 1948.
Normally under shop & Estabilishment act maximum leave to encashed is 40-45 depends upon state to state.
And under Sales Promotions Employee Act maximum leave to be encashed is 120 days.
It is calculated on last Gross salary drawn.

Dear friends,
"Wages" is a comprehensive term including the entire package of compensation payable to an employee for the work done by him at the end of the predetermined wage period. Therefore, it would generally include the allowances given in the form of fringe benefits. Whenever the employer has the necessity to compensate the employee for any given period in lieu of his work or any work done by him in excess of his normal working hours, logically and legally, he has to pay the entire components of the actual wages minus only such components compensating the defrayal of the special expenses likely to be incurred by the concerned employee. Encashment of leave and payment for OT work, therefore, would require the same treatment. One may argue why then the difference in the definition of the same term in certain Enactments. It is only because of the nature of the benefit sought to be given under the Act rather than bringing in a uniform interpretation of the term. The exclusion would come in to play only in respect of the computation of that particular benefit and not in respect of all others. The actual practice, if any, contrary to the above legal position, in spite of its ubiquitousness, would not pass legal scrutiny.

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