How Do You Calculate Earned Leave? Seeking Clarity on the Right Formula

Hi, I have a query about the calculation of Earned Leave. Kindly suggest the formula for calculating EL. Is it Basic/26 * No. of EL or Basic/30 * No. of EL as per the law? Please suggest.

How are management liable to pay the government if they provide leave encashment to employees? Alternatively, is it better to classify leaves under CL, SL, PL so the management is less liable for leave encashment or carry forward?

I hope I have articulated my query correctly.

Thanks,
Kavitha

As Mr. Ram said, depending on the company policy, leave encashment is calculated. In your company, the policy is available. So, according to your policy, leave encashment has been calculated based on Basic X No. of Leaves / 26 days that we need to consider.

Still, if you have any doubts, please refer to Section 10(10AA) as per the Income Tax Act, 1961.

If you have any queries, please call me.

Regards,
Suresh VVN
Payroll Manager - [Phone Number Removed For Privacy Reasons]

I also have the same query, please reply. Is the formula different for white-collar and blue-collar employees?

Leave Encashment Clarification

I would like to know about the leave encashment. It is said that there are 15 days of Earned Leave (EL) for every calendar year. I just want to clarify if these 15 days of EL are separate from Casual Leave (CL), Sick Leave (SL), Privilege Leave (PL), weekly offs, and public holidays.

Hello Seniors,

I have a question. I have joined a new company, and they provide 22 leaves in a year. They do not have any bifurcation for it; all are PL, and only 5 leaves can be encashed, that too during the end of the financial year. Additionally, next year's leaves also start at the beginning of the new financial year.

I would like to know what the government rule says because, as per my knowledge, it's based on the calendar year.

Please guide. I anticipate your help.

Regards,
Today From India, Mumbai

Please let me know if you are working in the service sector or a manufacturing unit. The leave policy is also applicable based on the type of company and its performance, i.e., the Factory Act - 1948 and the Shop & Establishment Act.

Factory Act - Section 79 (i) (ii):

1. One day for an adult worker for every twenty days of work performed by him during the previous calendar year.
2. One day for a child worker for every fifteen days of work performed by him during the previous calendar year.

The maximum carry forward leave is 30.

Shop & Commercial Establishment Act - 1948:

You can refer to the state legislation. Feel free to reach out to me for any further clarification.

Have a great day.

Regards, Seetarama Moger