Earned Leave Encashment Confusion: Should We Divide by 30, 31, or 26 Days?

Dear all HR professionals,

Please help. We provide earned leave encashment to all employees. Our calculation method is as follows: 5000 / 30 * 15 Earn Leave.

Where is the provision of 30 days written in any act? Are all calculations supposed to be divided by 30, 31, or 26 days? I need clarification on this from the relevant act.

Thank you.

Dear,

Provisions relating to encashment of Earned Leaves are provided in the State Shops & Commercial Establishment Act and The Factories Act, 1948. Therefore, first, determine which of the Acts is applicable to your establishment and then refer to the specific provision in that Act for your query.

With Regards,
R.N.Khola

How do we calculate the earned leave eligibility? Is it for 1 day for each completed working period of 20 days? For the purpose of this calculation, can we take the paid holidays into account?

Dear Ramachandran,

In my opinion, if an employee is entitled to receive encashment of earned leaves standing to his credit in accordance with any of the enactments, then gross salary is to be considered. You must have seen that one can accumulate a certain number of earned leaves as prescribed under applicable law for the unit. If the number of leaves exceeds the limit, then it is at the discretion of the employer whether to encash this excess or not. If none of the Acts are applicable, then we are to abide by the service rules of the unit.

R.N. KHOLA

Dear Sir, I request you to please clarify my question: Is earned leave calculated from gross salary or basic salary?

Thanks & Regards,
Ramachandran