Leave Encashment in Software Companies: Should It Be Based on Basic + DA or Full Salary?

Hi All,

Can anyone tell me the calculation of leave encashment in a software development company? Should it be calculated based on the Basic + DA or on the entire salary?

Regards,
Rajashree Bhalerao

Hi Friend,

I am afraid of how one can say that Leave Encashment is only paid on the Basic + DA. It's always paid on the full part of the salary, i.e., the total salary. Beyond that, P.F. is deductible on Basic + DA. So be careful.

Cheer & Bye,
SSehgal

Dear All,

The calculation for leave encashment is done as follows: (Basic + DA)/30 * number of EL in hand (if DA is in your salary structure). Leave encashment is done only on Basic + DA with a 30-day base.

Regards,
Mridula

Can anyone tell me the calculation of leave encashment in a software development company? Should it be calculated on the Basic + DA or on the entire salary?

Regards,
Rajashree Bhalerao

Hi,

Based on judgments of various courts (not citing the case laws), encashment is expected to be done on monthly gross salary and not on Basic + DA, although most companies follow this practice. Please consult your labor advocate who shall clarify this subject further.

In this context, I shall only suggest you find out what shall happen when an employee proceeds on leave - do you pay them only Basic + DA or monthly gross? I hope this gives you some clarity.

I would like to further enlighten you that with an amendment in PF Law through a notification, encashment shall attract PF deduction as well. Please be informed on this subject.

Regards,
Rajpal

Dear Rajpal,

I agree with you that Leave encashment is paid on full gross wages. Could you provide documented provision for this issue as I am in urgent need?

Regards,
S. Sehgal

Hi Anagha Ashok Inamdar,

I am a member of your great site and I have a query about leave encashment. How do you calculate leave encashment? What is the definition of leave encashment? I am currently working in a private limited company as an HR assistant. Please keep in touch with me.

Thank you,
Anagha

Hi All,

I have noticed various responses regarding Leave encashment, and I would like to provide some insights based on the earlier feedback:

Please note that companies can calculate Leave Encashment in two ways:
1) Basic + DA / 26 (days per month) * Number of Earned Leaves
2) Net salary / 30 (days per month) * Number of Earned Leaves.

The number of days per month can be either 26 or 30. Some companies use 26 days based on the assumption that employees do not work on Sundays, so the earned leaves should only account for the actual days the employee has worked.

I hope the above information helps to clear any confusion that may have arisen from previous responses.

Cheers! Disha