Please help understand if the leave encashment during separation should be calculated on Gross salary or basic salary.
From India, Mumbai
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1From India, Mumbai
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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
From India, Hyderabad
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From India, Hyderabad
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Dear Aks Would appreciate, if you can support your calcification here above with legal provisions etc. Shailesh Parikh 99 98 97 10 65 Vadodara
From India, Mumbai
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From India, Mumbai
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Dear Friends,
Leave encashments are calculated on basic salary only. It is at the discretion of the employer to do it on the Gross salary too; however, provisions and actuarials 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 the Gross salary, please share.
Regards,
Rahul
From India, Delhi
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Leave encashments are calculated on basic salary only. It is at the discretion of the employer to do it on the Gross salary too; however, provisions and actuarials 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 the Gross salary, please share.
Regards,
Rahul
From India, Delhi
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Hi,
CHAPTER VII
Leave, Holidays with Wages, and Insurance Scheme for Employees
30. Leave:
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 a period of fifteen days, provided that such leave with wages may be accumulated up to 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 to the encashment of eight days of leave with wages that have accrued to him under subsection (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 information is taken from the Shops and Establishments Act of Andhra Pradesh, and even Telangana follows the same regulations as mentioned above (Page 16/17 of the Act).
Thanks and Regards
From India, Hyderabad
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CHAPTER VII
Leave, Holidays with Wages, and Insurance Scheme for Employees
30. Leave:
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 a period of fifteen days, provided that such leave with wages may be accumulated up to 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 to the encashment of eight days of leave with wages that have accrued to him under subsection (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 information is taken from the Shops and Establishments Act of Andhra Pradesh, and even Telangana follows the same regulations as mentioned above (Page 16/17 of the Act).
Thanks and Regards
From India, Hyderabad
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Dear Aks17,
Please check the definition of wages in section 2 of the same act. Wages don't include any allowance, reimbursement, or other benefits; while gross salary comprises allowances, reimbursements, OT, etc.
Hope this clarifies.
Regards,
Rahul
From India, Delhi
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Please check the definition of wages in section 2 of the same act. Wages don't include any allowance, reimbursement, or other benefits; while gross salary comprises allowances, reimbursements, OT, etc.
Hope this clarifies.
Regards,
Rahul
From India, Delhi
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Hi,
The points mentioned by you pertain 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 from the basic salary. Salaries for encashment include 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.
From India, Hyderabad
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The points mentioned by you pertain 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 from the basic salary. Salaries for encashment include 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.
From India, Hyderabad
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As I mentioned earlier, usually, leave encashment is done on Basic (+DA if it applies) salary; however, it is at the discretion of the employer to do it on gross too. Going by the definition of wages, section 2(23).e(v), (vii) of the aforementioned act mentions that wages don't include any special allowances or house rent allowance. Hence, according to the law, leave encashment can't be done gross if it includes special allowance or HRA. Yet the law doesn't forbid employers from passing additional benefits to the employees.
Regards,
Rahul
From India, Delhi
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Regards,
Rahul
From India, Delhi
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Leave encashment is only eligible for leave that is paid, named as Earned Leave/Privilege Leave/Paid Leave. The amount should be calculated based on Gross Salary, as per the Shop & Establishment Act. It is clearly mentioned that it is calculated on full wages, and the definition of wages is defined by the Minimum Wages Act, 1948.
Normally, under the Shop & Establishment Act, the maximum leave that can be encashed is 40-45 days, depending on the state. Under the Sales Promotions Employee Act, the maximum leave that can be encashed is 120 days. The calculation is based on the last Gross salary drawn.
From India, Hyderabad
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Normally, under the Shop & Establishment Act, the maximum leave that can be encashed is 40-45 days, depending on the state. Under the Sales Promotions Employee Act, the maximum leave that can be encashed is 120 days. The calculation is based on the last Gross salary drawn.
From India, Hyderabad
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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 into 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.
From India, Salem
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"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 into 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.
From India, Salem
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Dear friend from Hyderabad, If your employee goes on earned leave for 15 days after due approval, will you pay him only basic and D.A for those 15 days?
From India, Salem
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From India, Salem
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NO, If the EL balance is more than 15 we can pay for the rest Ex ;-29-15=14 el’s
From India, Hyderabad
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From India, Hyderabad
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There is no legislation on leave encashment during the service of an employee. Permitting leave encashment and its computation in such cases is at the discretion of the employer. Logically, the same components of wages that are considered for paying the employee when they avail leave should also be taken into account for its encashment.
For encashment at the end of service, consider the definition of wages and other provisions of the respective Acts governing the same.
Varghese Mathew
Tvm 9961266966
From India, Thiruvananthapuram
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For encashment at the end of service, consider the definition of wages and other provisions of the respective Acts governing the same.
Varghese Mathew
Tvm 9961266966
From India, Thiruvananthapuram
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leave encashment should always be calculated on gross salary. sumit kumar saxena
From India, Ghaziabad
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From India, Ghaziabad
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Is leave encashment to be calculated by dividing it by 360 or 240?
My settlement is pending, and my previous employer is calculating it by 360 days. However, the Gujarat Shops and Establishment Act shows earned leave based on 240 days.
I am not clear on the encashment calculation. Please help.
From India, Ahmedabad
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My settlement is pending, and my previous employer is calculating it by 360 days. However, the Gujarat Shops and Establishment Act shows earned leave based on 240 days.
I am not clear on the encashment calculation. Please help.
From India, Ahmedabad
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Dear Mayankmantri,
I am not able to understand your query. Leave Accrual and Leave Encashment pertaining to E.L are different. The former is on a yearly basis, and the latter is on a remainder basis. So where is the question of computation of leave encashment on the basis of 360 or 240 days?
From India, Salem
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I am not able to understand your query. Leave Accrual and Leave Encashment pertaining to E.L are different. The former is on a yearly basis, and the latter is on a remainder basis. So where is the question of computation of leave encashment on the basis of 360 or 240 days?
From India, Salem
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Dear Sir,
Thank you for your quick response. My question pertains to the calculation of the remainder while determining the leave encashment amount. I have observed that my previous employer calculates this by dividing it by 360. Could you please confirm if this method aligns with the laws specified in the Gujarat Shops and Establishment Act?
For instance, if I have accrued 10 leaves as part of my full and final settlement, would the calculation be as follows:
(Gross pay / 360) * 10 = leave encashment amount
Your guidance on this matter would be greatly appreciated.
Thank you.
From India, Ahmedabad
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Thank you for your quick response. My question pertains to the calculation of the remainder while determining the leave encashment amount. I have observed that my previous employer calculates this by dividing it by 360. Could you please confirm if this method aligns with the laws specified in the Gujarat Shops and Establishment Act?
For instance, if I have accrued 10 leaves as part of my full and final settlement, would the calculation be as follows:
(Gross pay / 360) * 10 = leave encashment amount
Your guidance on this matter would be greatly appreciated.
Thank you.
From India, Ahmedabad
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Dear friend,
I believe your query pertains to the calculation of the surrender value of the Leave salary. Under the Shops and Establishments Acts, employees are entitled to paid weekly holidays, National and Festival Holidays, PL, SL, and CL. Therefore, with their salary being monthly rated, the daily rate should be calculated by dividing the monthly salary by 30 only. The simplest formula to calculate the surrender value of EL would be: The last drawn monthly salary/30 X Number of days of EL surrendered.
From India, Salem
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I believe your query pertains to the calculation of the surrender value of the Leave salary. Under the Shops and Establishments Acts, employees are entitled to paid weekly holidays, National and Festival Holidays, PL, SL, and CL. Therefore, with their salary being monthly rated, the daily rate should be calculated by dividing the monthly salary by 30 only. The simplest formula to calculate the surrender value of EL would be: The last drawn monthly salary/30 X Number of days of EL surrendered.
From India, Salem
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Thank you so much, sir!
I saw a calculation in another post or portal that divided by 26 as well. I have confusion just because I will not be able to take leave on weekly holidays. Shouldn't it be divided by the working days of the month?
From India, Ahmedabad
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I saw a calculation in another post or portal that divided by 26 as well. I have confusion just because I will not be able to take leave on weekly holidays. Shouldn't it be divided by the working days of the month?
From India, Ahmedabad
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As per Statutory Act it will be deducted from BASIC SALARY only....
From India, Bangalore
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From India, Bangalore
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Dear Friend, ITS ON STATUTORY GROUNDS " ITS SHOULD BE PAID ON BASIC SALARY". My clients are paying on the Basic Salary only.. As per the Act / Policy..
From India, Bangalore
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From India, Bangalore
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Of course, I haven't come across any regulation to stipulate the leave encashment process. There were discussions in this link on the subject- https://www.citehr.com/17052-pf-esi-...-download.html
To some extent, the attached AP HC judgment provides some guidelines by tagging the IT act provisions in respect of leave encashment, which I hope shed some light on the matter.
From India, Bangalore
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To some extent, the attached AP HC judgment provides some guidelines by tagging the IT act provisions in respect of leave encashment, which I hope shed some light on the matter.
From India, Bangalore
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Leave Encashment & Salary Calculation.xls x
LEAVE ENCASHMENT NOT INCLUDED IN WAGES FOR P. F. CALCULATION.pdf