Confused About Leave Encashment: Is It Calculated on Basic or Gross Salary?

Dear Sir,

I would like to know what the exact rules are for the calculation of leave encashment, whether it is based on Basic salary or Gross salary. I would be highly grateful if you could provide me with this information.

I am a little bit confused because I have discussed this with many of my friends regarding their companies' policies. Some have mentioned that it is based on the basic salary, while others have said that the rules have been changed and it is now calculated on the gross salary. Therefore, I kindly request that if it is now based on the gross salary, you could please provide me with the details of the amended rules.

Thank you,
Aarti

Dear Arti,

Under which of the Act & Rules are you liable to make calculations for leave encashment?

With Regards,

R.N. Khola

Quote from aaartinayak:
Dear Sir,

I would like to know the exact rules for the calculation of leave encashment, whether it is based on Basic salary or Gross salary. I would be highly grateful if you could provide me with this information.

I am a little confused because I have discussed this with many of my friends regarding their companies' policies. Some have mentioned it is based on basic salary, while others have stated that the rules have been changed and it is now calculated on gross salary. If this is the case, could you please provide me with the details of the amended rules?

Thanks,
Aarti

Dear Aarti,

As per the Factories Act of 1948, we are required to make leave encashment based on gross wages/salary up to the statutory limit for the accumulation of Earned Leaves, i.e., 30 days. However, if this leave accumulation exceeds the limit, then it is at the discretion of the employer whether to provide payment for these additional leaves or not. In such a scenario, the employer may choose to encash them based on the basic salary. This confusion arises due to this situation. For further details, please refer to Chapter VIII on leave with wages. Regarding the Shops Act in our state, a similar situation exists, but you will need to review your State Shops Act as I do not have a copy of it.

Opinions/comments submitted as requested.

With Regards,
R.N.Khola

Hi Aarti,

As per the rules of the Government of India, leave encashment is calculated based on the last basic salary of a confirmed employee. For instance, if somebody joins in March and gets confirmed in September with a nominal increment, then during the next leave encashment, they will be paid according to their last basic salary.

Regards,
Renu

Hi,

It depends on the company. For example, in my company, which is involved in manufacturing agricultural equipment, we encash it based on the basic salary.

Regards,
Radhika

Dear Radhika,

In my opinion, the company is not at liberty to encash Earned Leaves at the basic rate of an employee/worker. If you do not mind, please let us know which Labour Law gives us this type of liberty.

With Regards,
R.N.Khola

Hi, It depends on the company. For example, in my company, which is into agricultural equipment manufacturing, we encash it based on the basic rate.

Regards,
Radhika

Dear Mr. Khola,

Is CL compulsory for the factory workers in Mumbai? We provide PL/EL for 15 days and SL for 7 days, totaling 22 days. Is CL still mandatory? Kindly advise.

Dear Pradeep,

Sorry, I do not have the knowledge of your State Act relating to the grant of casual and sick leaves to factory workers. Most of the states have enacted the NFH Act under the name of State (name) Industrial Establishment (National, Festival, Casual, and Sick Leaves) Act. If this Act is in place, then you are required to grant casual leave as per this Act.

With Regards,

R.N.Khola

Dear Mr. Khola,

Whether casual leave is compulsory for factory workers in Mumbai. We provide PL/EL for 15 days and SL for 7 days, totaling 22 days. Is it still compulsory for casual leave? Kindly advise.