How Does Your Company Calculate Leave Deductions? Seeking Clarity on Unpaid Leave Policies

Hi All, I am working in an MNC with a 5-day workweek. In our organization, if an employee takes unpaid leave in a month, the amount for their leave deduction is calculated based on the number of working days, not the total number of days in the month (i.e., 30 or 31 days). With a 5-day workweek, the number of working days is 22, which may further decrease if there are any holidays in that month. Consequently, the amount deducted for such leave can be substantial, which is a concern for employees.

Is There a Specific Rule for Leave Deduction Calculation?

Can anyone provide guidance on this matter?

Thanks and Regards, Simple Bajaj

I also agree with Mrugen Vyas. Usually, it is calculated by dividing the total salary by the number of days in a month and then multiplying by the number of days an employee came in a month or was on leave.

Regards,
Shreya Parikh
HR Executive

Thank you for your reply. I would still request you to please mention any provision as per the law which mentions this calculation, if any.

Regards,
Simple Bajaj

My query is whether the calculation of deduction of leaves based on the number of working days in a month is mentioned in any law.

Supreme Court Decision on Gratuity Calculation

There is an old Supreme Court decision in a gratuity case that states the daily rate needs to be computed by dividing the monthly salary by 26. This is the benchmark now followed by courts. Even minimum wage laws adhere to the same rule. The daily rate does not change with a change in the number of working days or the number of holidays declared for a month. Even for February, you still use the same method of dividing by 26.

If you are aware of the Supreme Court ruling, could you please share that?

So, is the amount for unpaid leave also calculated based on the number of working days?

Supreme Court Ruling on Gratuity

It is quoted in every book and even in bare acts on gratuity. Google for Jeevanlal Ltd vs. Appellate Authority under Gratuity Act.

Wage Calculation Under Delhi Shops & Commercial Establishment Act

If your company is governed by the Delhi Shops & Commercial Establishment Act and your employees are entitled to wages for weekly offs or rest days under Section 16 or 17, you need to calculate daily wages by dividing the monthly salary by the actual calendar days of the month or 30 (as per the General Clauses Act).

The Supreme Court case Banerjee referred to is Digvijay Woollen Mills Ltd v. Mahendraprataprai Buch (1980 AIR 1944, 1981 SCR (1) 64).

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

As a new HR professional in a software company, I would like to clarify whether if an employee takes a half-day leave on Saturday afternoon and then takes another half-day leave on Monday morning, will Sunday be considered as leave as well?