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Asso.prof.(commerce & Management)
Pan Singh Dangwal
Joint Manager
Ankitavaid320@gmail.com
Srf Ran Engineer

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Dear All, Please help me to calculate the leave encashment , for example if some one has basic=Rs 4833 and Annual leave balance=19.
Dear Ankita,
On basis of above, it should be Rs. 3532 (4833/26*19).
But, I think you have not provided complete information. Pls note the below
1.The encashment of leave should be paid on Basic + Allowances. You have given Basic only. If any allowance/s is also part of the Gross Wages, that all will be considered.
2. You have posted from Delhi where the Basic (as per MW Act) is very high, so note this point as well. If it is related to any other state. Please make sure the Basic Wages must be as per MW Act (under the appropriate govt.).
Seniors can suggest more views or correct me, if feel so.

Dear Ankita & Pan Singh,
Pl.read the discussion taken place in this forum on the subject in this link:
https://www.citehr.com/599968-annual...oss-basic.html.
There are a few points to be noted in the matter:
1. Leave encashment is not a right to be exercised by the employees though an option. In fact many employers don't have such a policy, except on separation such as retirement, resignation, death;
2. The basis for computation is salary, is 'the emoluments' what an employee would have drawn had he availed a paid leave viz., EL/PL., of course minus abnormal earnings like OT/holiday wages, incentive, conveyance etc. which are linked to actual work and reimbursements if any.
3. Except EL/PL no other leave such as CL, Sick Leave, unutilised Maternity leave which are available for actual availing on occurence of such events, is encashable;
4. The No.of days encashable also left to the discretion/policy of the employers as it varies from employer to employer. (many allow only upto 50% of days at credit in leave a/c). However on retirement/superannuation EL/PL in full, subject to the maximum stipulated can be encashed.
5. Till the judgment of SC contribution on encashed amount was being recovered/contributed to the EPF a/c of employees. However SC in its judgment dt.12.3.2008 ruled there is no obligation on employee/employer to make such contribution on encashment (pl.see copies of docs. relevant attached.)
6. The amount of encashment will be treated as 'earnings' like salary and subject to TDS;
7. If I'm correct, the computation be made on 30 days basis instead of 26 days (except for the purpose of calculating gratuity which has been stipulated as such), this is general practice. However, no one can stop you if you would prefer to adopt month salary/26 days instead of 30 days;
8. There are a few firms which allow encashment linking it with LTA/LTC as and when employees avail LTA/LTC subject to eligibility.
9. As a regulatory measure, encashment not more than once in a year is followed. (At the same time, in small firms more than once are also permitted to help employees meet their commitments at their discretion)
It is better you should make out a 'Leave & Leave Encashment Policy' considering various practices being followed in your own sector which will enable you to regulate 'encashment' applications in a proper manner.


Attached Files
File Type: pdf SC on LEAVE ENCASHMENT NOT INCLUDED IN WAGES FOR PROVIDENT FUNDS CALCULATION[1].pdf (32.5 KB, 146 views)
File Type: pdf NO PF Contribution on Leave Encashment - SC judgment-Clarification by EPFO.pdf (230.0 KB, 116 views)

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