How Do You Calculate Year-End Earned Leave Encashment? Seeking Guidance!

Hello,

Can anyone please tell me the formula for encashing earned leaves at the year-end?

Thank you,
Anju

Hi,

One day leave is one day pay calculated by 26 or 30, as you calculate salary every month. Suppose your company gives an employee 15 Earned Leaves every year, and one of the employees availed only 5 ELs. Thus, at the end of the year, he is left with 10 EL in his account. Suppose his salary is Rs. 6000 per month. Upon dividing 6000 by 30, we get Rs. 200 per day. Therefore, the employee will be paid leave encashment of Rs. 200 * 10 leaves = Rs. 2000.

In another case, if you divide it by 26, the one day pay shall be Rs. 231, thus 10 days of EL shall be encashed at Rs. 2310.

I hope it's clear.

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

Hi Anju,

Calculation of earned leaves is based on the policy of the organization. EL is calculated based on basic + HRA. The calculation for 25 unused ELs is as follows:

Basic: 5000
HRA: 2000 (40% of basic)
EL per day: (5000 + 2000) / 26 (26 days per month are taken as working days and not 30 or 31)
= 270

Hence, for 25 EL, it is 25 * 270 = Rs. 6750.

Priya