Leave Encashment - Pf Deductions

Hi All,
During an interview, i was asked a question which is still not answered. Why is leave encashment, PF deductions, bonus calculations done on only basic?
Thanks,
vidya pai

Hi Vidya,
In the factory act, 1948 it is cleraly defined that the calculation of leave, bonus, pf, will be calculate on basis salary. Not only factory act you may refer PF, Bonus act also for the same. Basic Salry is equal to WAGES which every act reflect
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dear vidya
your question is why leave encashment,PF deductions,bonus calculaion is done on basic.
let me clear you that it is not mandatory to calculate leave encashment on basic.it is done on gross also.this calculation varies from company to company because law is silent on this.
pf deduction and bonus is calculated on basic because it is given in act.we are following law of the land for the same.
tks
js malik

Dear Vidhya,
Leave encashment is vary from company to company, policies to policies. Eg. For instance a "head of the organisation" will mention in the meeting that if they reach the target or a certain goal, company will provide the gross amount (May be double the amount per day) leave encashment so as to discourage the leave taking tendency. like wise wise versa will also be happen in this ressision time.
the normal calculation is if he has 10 more leave encashment is there, he is collecting Rs.10000per month then the calculation will be 10000/30 = 333.33 X 10 days X 2 = 6666.60, this may help you.

Dear Vidya,

It is correct that there is no such provision in any of the labour laws which entitles any employee/Worker to encash his/her leaves in between the period of employment. While making full & final payment the earned leave encashment is made according to Factories Act or State Shop Act Which ever is applicable upto the maximum limit under these Acts to be calculated at the rate of last drawn salary/wages. While according to the definition as laid down under section 2(21) of the Payment of Bonus Act,1965 the bonus is to be paid on the basic wage plus dearness allowance. Free food allowance/food is also considered if provided as part of wages to the employee.We have to go through the definition of wages in cases where there is is bifurcation in salary components only otherwise where there is daily or consolidated monthly wage determination then there is no dispute regarding calculation of benefits of the employees.

Opinion submitted as per you request.

Reagrds,

R.N.Khola
Sr.Associaye

Regads

Dear Vidya
As per my opinion the gross package or CTC varies from company to company.Diffrent organisations go for diffrent salary structure.This may be the reson for a unison settlement to avoid any kind of biasness among employees at the same level.mean basic would vary level wise but calculating encashment and other statutory calculations on basic would avoid considering other perks or performance based incentives.This would make the policy uniform for all.
Regards
Suman

Hi Vidya
Leave encashment calculate on the basic
so it is obiviously vary from individual employee's
basic* days of remaining PL / total days of month
it is a formula to calculate the same