Leave Encashment Dilemma: Do You Use Basic or Gross Salary for Calculations?

Dear All,

Do you consider basic salary or gross salary for leave encashment?

Regards,
Vibhor

Hi Mr. Vibhor Gupta,

The leave encashment will be calculated based on the last drawn basic salary, but few organizations are giving it based on the last drawn gross salary. You can consider the basic salary to reduce the cost to the company.

Thanks & Regards,
Sujatha

Dear Vibhor,

In our opinion, the gross salary is to be taken into account for calculating the Earned Leave encashment. If an employee takes leave, they are paid their full salary and not just the Basic, etc.

Regards,
R.N. Khola

Encashment practices would differ from company to company. In case a company offers leave encashment at a percentage of the basic salary, then any notice recovery is also calculated based on the basic salary. Both the notice recovery and leave encashment rates should be the same (either basic or gross).

Dear Vibhor,

You have seen different people have different perceptions. What the law says is: Basic + DA * number of leave/26. However, the law is silent on leave encashment. You can go either way, but I still recommend you to go for basic salary as it will reduce the cost for the company.

Also, it varies from company to company.

Regards,

Vipin:icon1:

Dear Senior,

How many PL should be encashed maximum? Should any EL/CL be encashed?

Regards,
Bisu

Dear Vipin,

I would like you to review your company's policy. The maximum number of paid leave (PL) days that can be accumulated is 40. Alternatively, you can consider granting 21 days of leave to employees who complete 240 days in a year, as it is also mandated by law. Employees should have the option to encash these days, although this is an internal matter for the organization to decide.

Regards,
Vipin :icon1:

Dear Seniors,

I am Sudheer V. Our company's Leave policy states: "No leave is to be availed during the period of probation." Please clarify if there are any objections. 🤔

Thank you.

Dear All,

Kindly clarify the following:

Our company is about to start its commercial operations. So far, we have not yet prepared the Standing Orders of the company. Currently, our company's Payroll shows 80 employees (both from the Head Office and the Factory). However, in this payroll, we have included the names of Drivers and Pantry Boys who are on a temporary basis. How should we prepare the standing orders? Should the classification of employees/workmen be included in the standing orders? Please clarify.

Regards, Murali
Email: murali_uma2003@yahoo.com

Hi,

In our organization, the calculation for workers' pay is based on the formula: basic/30 * number of paid leaves (PL). For employees, the calculation is basic/26 * number of paid leaves (PL).

Please let me know if you need any further clarification or information.

Dear Vibhor,

The leave encashment is to be done on gross salary including Basic Salary, HRA, DA, Conveyance, and all payments given to employees under the head of Salary/Wages as per statutory Regulations, Leave Rules, and the Industrial Act of 1948. This head does not include Overtime, Meals, Incentives, or any other allowances that are not regularly paid under the head of salary/wages.

However, many companies manipulate the laws and do not pay reimbursements on gross salary. The Karnataka High Court issued a judgment in 2007 stating that manipulation of laws by companies is not acceptable in the court of law, and decisions are made against the company.

I hope this answers your queries.

Regards

Dear Seniors,

I am Sudheer.V. Our company's leave policy states that "no leave is to be availed during the period of probation." Please clarify if there are any objections.

An employee is not entitled to any leave during his first 30 days of service. After completion of 30 days, he is entitled to Casual Leave and Medical Leaves. After completing 1 year of service, he becomes eligible for privilege/Earned Leaves.

Hope you have received the answers to your queries.

Hello everyone,

Can anyone please help me make a letter asking my company to pay me cash in lieu of my annual ticket to my home country? How should I ask and what should I say to convince my company to give me cash instead of air tickets? The ticket they are planning to provide is to the capital of my home country, but I live far from our capital city. I would like to purchase my own ticket to save money and time on travel. Is this possible? Please help me. :(

I too agree with Prasanth. Encashment practice would differ from company to company. As per our company policy/practice, we are considering gross salary for the same.

-Anoop

Dear Vittala,

As per our company's leave policy, the employee is eligible for 2 flexible leave days and 2 sick leave days during the probation period. After the completion of probation, employees are eligible for 12 earned leave days per year.

-Anoop

Hi,

The leave encashment is governed by the Factories Act. As has been suggested by other members, while the policy may vary in each company, you may design a leave encashment plan that will motivate employees to both utilize their leave in a timely manner (boosting morale) and encourage them to stay with the company for a longer period. Therefore, you may consider designing a policy along the following lines:

(a) Compute encashment based on the last basic pay drawn.
(b) Set a maximum limit for encashment tied to the number of years of service rendered. For instance, if an employee has completed 5 years of service and accumulated 100 leaves, implement a policy that states for Service <= 5 years, the maximum leave encashment would be 60 days.
(c) Additionally, you can establish a cap on the number of leaves that can be encashed each year. For example, if the Earned Leave (EL) balance is 25, you could have a policy that restricts the maximum encashment to only 15 days.

I hope these suggestions help in formulating an effective leave encashment policy.

Hi,

Though practices may differ from company to company, it is generally basic pay that is taken for leave encashment for management cadres.

Jai

It will depend on the company policy, whether it is based on basic salary or gross salary.

Regards,

A.K. Roy
Accounts Officer
Sathyam Construction
Surat.

Hi, Dear Friend,

As per the law, the company needs to pay at least on Basic+ DA/VDA. If the company wishes to give more advantage to its employees, it can pay more by calculating on Gross. It would be completely at the company's discretion.

Lakshman Kumar Grandhi