How Do You Calculate Earned Leave Credit? Seeking Advice from the Community

Dear Friends,

Can anyone help me with how to calculate the EL amount (EL standing to the credit)?

Thanks in advance,

Dear Meetca,

EL or PL is calculated based on the last basic salary plus DA earned by the employee. The calculation is as follows: Last Basic + DA / 26 * Number of Balance leave.

Thank you.

Dear Sir,

Thank you for the reply. If DA is not considered for PF calculation, can we consider it for EL calculation, or do we only need to consider Basic?

Thanks & Regards,

Dear Ponaraj,

Thank you for the reply. If DA is not considered for PF calculation, can we consider it for EL calculation, or do we only need to consider Basic?

Thanks,

Why are you in confusion? For PF and EL encashment, both the components, i.e., BASIC and DA, should be considered.

Sir,

I understand that DA also forms part of PF if a company's salary breakup consists of only Basic+DA, and Basic is considered for PF deduction. Now, based on the above, do I have to calculate by considering Basic only? Is that correct?

Thanks,

Based on the above discussion, I understood that your company only considers Basic for PF calculation. It seems that if this is the case, the calculation is wrong. Both Basic and DA should be taken into consideration when calculating PF contributions.

So, you are agreeing that PF calculation is wrong. And for EL calculation, you want to continue the same mistake again by taking only basic?? Whether it is EL or PF, both Basic+DA need to be considered.

We have a practice of keeping the salary components as follows for staff and executives: Basic 40%, DA 20%, HRA 20%, Conveyance 20%.

Is this structure in any way violating a rule? Please clarify.

Dear Meetca,

A lot of companies in our country are still without DA component in their salary packages. To compensate the employees against the increase in the price index, they provide a varying lump sum between 15% to 30% of the existing Basic pay annually as an increment based on the individual's performance. In this case, only basic pay is considered for various obligations including PF, Bonus, Gratuity, as well as Notice pay and calculation of EL/PL encashment.

With regards,
R.K. Singh

For calculating PF: BASIC+DA has to be considered.

For calculating EL: It differs from organization to organization, but the general practice is BASIC+DA divided by 26 multiplied by the number of days of EL to be encashed.

Regards,
Swapan

For calculating gratuity: BASIC + DA divided by 26 multiplied by 15 multiplied by the number of years of service, where six months or more is considered as one complete year, and less than six months is not considered. Gratuity is payable only when an employee leaves the organization and must have completed five years of continuous service in that organization.

Example for calculating gratuity: BASIC + DA = 5000 No. of years in service = 5 years & 8 months (here 6 years is to be considered) Gratuity payable = [5000/26] x 15 x 6 = 17307.69 Rounded off to Rs. 17308.00

Hope it's clear, dear Sanju.

Regards, Swapan