Leave Encashment Query

Hi
Since the leave encashment is on a yearly basis, we calculate leave encashment as
(Basic + DA + Personal Pay) x 12 months / 365 days = per day basic salary
If a person has taken continuous leave from Friday to Tuesday you shall consider sundays also leave and caculate for 5 days. In this case saturday / sunday is a holiday and you have to consider leave till friday / saturday as the case may be.
Regards
Bharathi

Dear Aditi
Leave Encashment is calculated on total salary i.e., Basic, Da, HRA etc.
Formula is : Total Salary/26 * No of days
But, if you have a separate agreement with workers excluding some components, those may be excluded. Leave Encashment amount attracts PF.

Dear friends
i want some clarification regarding the statement given by Ms.K.Anita
The holidays are clasified in to 2 catogories. one is national hliday and another one is festival holiday. We have to pay the four national holidays whether he worked before or after. ie we have to pay on aug 15th eventhough he is not attending duty from 10 to 20th. But He has to work before or after to get the festival holiday payment.
I required seniors openion in this regards
Regards
alphonse

Hi Friend,
It is on Basic only. And PF and Tax will aslo be deducted from that encashed amount.

Hi,
The basic purpose of LEAVE policy is to encourage staff to avail their leaves so that they can get rest from work and come back to office with a new zeal and enthusiasm. It results in higher productivity. Please note that it's a non-financial benefit rather than financial benefit.
In view of the above, leave encashment should not be encouraged. Hence, in case of any encashment, it should be based on Base pay. Gross salary will lead to differentiation in payments. For example, those who have been provided accommodation without any housing allowances, they will be receiving less than those staff (junior) who are withdrawing housing allowance.
Anyhow, it finally depends upon the company's policy and any policy may be adopted by the company. The above rule is standard.
Regards,
Khalid
HR Consultant
Mobile: 00971 50 790 8221

Dear Aditi,
The leave encashment computed on Basic Salary.
1. In case of workmen' compute per 26 days rate
2. in case of monthly rated employee, compute as per 30 days rate.
Also, you must deduct PF contribution on leave encashment.
regs,
Bhushan Dahanukar

Dear Aditi,
Leave Encashment is one of the benefits provided to employees by most of the companies.
In the Service Rules, you need to mention the details of Leave Entitlement and Leave Encashment. Suppose the leave entitlement is 37 days and you can encash 30 days, and the employee avails 10 days leave that year, then he can encash 27 days.
The calculation is done only on the Basic + DA component. If one month's Basic + DA is Rs 10000/-, then the leave salary would be 10000/30*27= Rs 9000.
I hope that the concept is clear.
Regards,
Vasudev

Hi Aditi,

The Leave encashment is calculated differently in different organisations:

- for Central Govt. employeees the formula is :

Basic Pay + DA x No of days unavailed earned leave

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30

- in case of industrial employees the formula is :

Basic Pay + DA /26 x No of leave to be encashed.

PF to be deducted from the amount. Income Tax is also to be paid since this constitute wages and hence treated as income in the hands of the employee.

In case of Central Govt. employee, such encashment is allowed only at the time of retirement, whereas in industrial concerns, it is allowed in between also, depending upon the Service Rules applicable.

Therefore, it can be noted that the difference is whether the salary is dividied by 26 or 30. In certain cases, alongwith basic pay and DA other allowances, which are received by all employees, are also taken into reckoning. For Example; City Compensatory Allowance.

Hope this give you an adies on the matter

Regards

Karath AK

It is calculated on basic pay. Single day amount can be arrived by dividing the basic amount by 30 days. PF is also deducted on encash amount that is later on deposited with PF Challan.
Regards,
H R Singh

hi dear aditi,
as i read ur quairy and a no of reply i found that some of reply r right but some of might be wrong. so be informe about it.
Basic+Da ia taken for Leave Encashment and is devided by 26 days & multiply by EL
PF is deducted on Leave encashment amount.
regards
leelu rajput