Understanding PL Encashment: Calculation, Deductions, and Compliance

Hi,

How does PL encashment work in companies? Does it need to be calculated on the basic or on gross? Does PL encashment need to be deducted with both PF and ESI? Please clarify these issues.

Regards,
Chitra

Dear Chitra,

PL encashment is done on BASIC + DA only. No deduction should be made on PL encashment. PL encashment depends on company policy. Each company will allow for some accumulations over & above they will encash. Also, on exit while doing Full & Final Settlement, whatever PL is left over will be encashed.

Regards, SIVA

[Login to view]

Chitra,

PL is calculated on monthly [Basic + D.A.] salary. The equation is: Monthly Salary (Basic + DA) x PL Days / 30 Days. PF and ESIC are not deductible on this amount.

Vishal

How much should be the minimum PL days as per Shops & Establishment Act? What is the basis of calculating these days – is it based on actual days present, total working days, or a formula like 1 PL day for 20 days/15 days, etc.?

Thank you for your inquiry.

Dear,

First of all, whether PL encashment is done on basic or gross depends upon your company policy because the law is not clear on it. Some companies pay it on gross, and some on basic.

The number of leaves as per the Shop and Establishment Act is not fixed, as different states have different quantum of leave.

Thank you.

JS Malik