How Should We Calculate Employee Leave: Calendar Year or Financial Year?

Hi,

I am working in an IT company (startup) and in the process of formulating HR policies. This is regarding the leaves - I wanted to know whether the leaves are calculated on the basis of the calendar year or financial year. If so, can you please give the reason why they have to be calculated accordingly?

Also, please help me understand how the leaves are calculated on a pro-rata basis.

I am eagerly waiting for your help.

Thanks in anticipation.

Thanks and Regards,
Harini

Hi,

You can achieve this. You need to check for the joining date of the employee (for new joinee) to allocate the leaves on a pro-rata basis. The formula would be somewhat like this:

Suppose your company gives 20 leaves in a year, then Pro-Rata Leave Calc = (20 * ((end date - either 31 Mar or 31 Dec for that year) - (Date of joining)) / 365 or 366.

I think this clears all your doubts.

Hi,

Thank you for helping me by providing the formula for calculating leaves on a prorata basis. This has removed half of my doubt. Also, please help me by providing the "reasoning" on whether the leaves have to be calculated according to the calendar year or financial year.

Please help me.

Hi,

That solely depends on your company policies. Some statutory leaves run from Jan-Dec, while others can be either Apr to Mar or Jan to Dec.

All laws pertaining to leave prescribe calculations for a calendar year, be it the Factories Act or the Shops and Establishments Act. Can we do it for the Financial Year? It is possible as long as your calculations account for some leave and as long as the inspector does not bother you. I have not faced any problems when I switched over to the financial year. But I believe whether you calculate for the calendar year or the financial year, we have no significant advantage or disadvantage.

Siva

Hi,

You can achieve this. You need to check for the joining date of the employee (for new joiners) to allocate the leaves on a pro-rata basis. The formula would be somewhat like this:

Suppose your company gives 20 leaves in a year, then Pro-Rata Leave Calculation = (20 * ((end date, either 31 Mar or 31 Dec for that year) - (Date of joining)) / 365 or 366.

I think this clears all your doubts.

Hi, can you please explain the above formula for Employee 'A' with a date of joining on 01-Jan-09 for the calendar year Jan-Dec cycle.