Provision Of Wage Calculation Leave Encasement (basic Or Gross)

Dear Sir
Recently i had join a manuf. unit in Maharashtra which is in commissioning stage. i had asked by Management to prepare various policies related to employees for the plant
While preparing policy relate to Leave encasement, i am facing some queries for the same.As it is general practice to claculate leave encashment on basic Wage, but my consultant had advised me to calculate on Gross salary. here i have query whether Leave encashment is based on Basic or on Gross
I searched any docu. evidence for the same can't found. As there are different openions for the same query
I need your sincere help to know the actual provision of wage calculation leave encashment (basic or gross)
Please help !!!

dear ...
There is no such any rule in factory act regarding this .. but normally the practice is applicable is below ;-
At the time of yearly leave encasement - hr people take gross salary as base , and
At the time full and final - they took basic salary as base ...
Rds
Shubhlash

Yes ,There is no Hard & fast rule under the factories act.
But Normally most of company follow the rule of leave encasement is done on basic salary at the time encasement.
Thanks & regards
Somvir Singh

Hi
I beg to differ with the above. The factories act specfically provided the manner in which leave with wages are required to be provided in section 80. Accordingly, wages=Basic+DA+Cash value of any food concession provided by employer.
regards

Hi Uday,
Of course there is direct prov. in law under which Leave encashment should be calcualted. There is small diff. wat Mravimtnl said as above. But logically, Leave encashment is nothing but surrendering or selling your leave days on which otherwise U should have worked. In other words leave is earned by working a no of full days on duty. So extending the same analogy U should have been on duty on these days as a normal working day but for this leave encashment and thus entitled for full wages (gross). Of course there are some exclusions such as OT, Conveyance reimbursement which are normally paid only for actual days worked/attended to duty. But U R entitled for PF on the leave encashed.
kumar.s.

Leave encashment should be on gross as the employee has worked for the leave he can avail. In-fact you can give employee two options-En-cash your leave or transfer the same to next calender year with a maximum limit which can be carried forward but this carry forward leaves will not be en-cashed.

As many of them said, there is no rule. Depends on the company policy. most of the companies considering Basic for leave encashment calculation.

Please note that.
The first and foremost thing is what your Standing Order (or your company policy)defines how the computation of Leave encashment is made.
If it is taken on basic, then following formula should be used to get leave encashment for a day-
=Basic salary for the month/30days
You can multiply by number of days leave credit for each employee to arriave at leave encashment payable.
Regards,
P.M.Das

There is a provision in Factories Act 1948 defining the manner in which it shall be computed.Sec.80 says that the daily average of a worker's total full time earnings(gross) minus over time and bonus on the basis of the number of days he worked during the month immediately preceding the date of his encashment shall be arrived at to calculate the quantum of leave encashment.Thus you need to include all componnets of salary except over time and bonus.
B.Saikumar
HR & Labour Law advisor
Mumbai

Mr Sasikumar is right.The word \'inclusive of DA \'in sec 80 does not mean that only DA should be considered.It means gross salary be taken but in no way DA be omitted.Another logic is what all components are paid as wages for the days an employee is on EL the same components shall be considered for surrender also.
Varghese Mathew