Hi seniors, I have a question. If we have leave encashment based on basic salary, can we also have leave deductions from the basic salary only? Is it necessary to deduct from the gross salary only?
No, deductions are done only on gross pay. We can't calculate deductions based on basic pay. Leave salary for the year will be calculated on basic pay. Rules play a significant role! Almost all concerns are following this pattern!
Understanding Leave Encashment and Leave Deduction
Leave encashment is a facility offered to employees to receive monetary benefits from their accumulated leave. Leave deduction is different, as the employee did not work during the deduction period. Therefore, only gross pay shall be considered. Both cases cannot be correlated.
Encashment leave is enforced as specified by the Factories Act, according to which the wage is defined as Basic & DA. In contrast, the loss of pay is affected on the gross salary as per the Labour Act.
Hope this is clear.
Regards,
PVVB KUMAR
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