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Hi All, Greetings!

Please let me know the rules of leave encashments. I have only two components in the Salary structure Basic+ HRA ( 60+40 ) %. Please help me ASAP.

Umang Mathur
HR & Admin Head
Shivam Exports

From India, Faridabad


The general practice among companies is to consider Basic+DA for PL/EL encashment.

But it should be on Gross earnings. When an employee proceed on leave he /she is paid full salary with leave not basic+DA only. Hence encashment should be on Gross earnings of the Employee.

From India, Madras

I also endorse the views of Sri Lakshmi Narayanan It is logical
From India, Chennai
ashok pal

You have only two components in the Salary structure Basic+ HRA ( 60+40 ) %. If an Employee takes leave, he gets full benefit, means full salary, if leave is available in his account. HRA need not include in leave encashment . HRA is given for whole month or NIL. It can not be given partial amount . To compassionate HRA you give 40% of basic. SO Leave encashment may be given like this.
=((basic pay* No of Leave days)/no of month days) (like 30, 31)

From India, Indore

Basic Allowance and Dearness Allowance is sufficient to pay the Leave Encashment.


HRA as per normal meaning is House Rent Allowance. There are employees in organizations who have their own residence and they are also enjoying HRA as a monthly gross components. Instead of HRA if the name of the pocket is CCA, Spl. Allowance, Medical allowance, Travel Allowance etc. , then in case of leave encashment it will be considered.

If HRA is paid only to those employees those who are staying in rental house, then all the logics are correct. But in this case it is universally paid to all employees.

To my opinion leave encashment should be paid on the basis of both Basic & HRA.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

From India, New Delhi
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