Confused About Leave Encashment? Should We Use 26 or 30 Days for Calculation?

Clarification on Leave Encashment Formula

I want to clarify from your side what the formula for leave encashment is. In other words, will we consider 26 days or 30 days for the payment of leave? Previously, when I was in Noida, I noticed many companies calculating leave encashment based on 26 days. The rationale behind this is that one day of leave is earned for every 20 days worked, excluding off days or holidays, so leave encashment should be calculated on 26 days.

However, some seniors from the accounting department are stating that since we pay a monthly salary, we should use 30 days for the calculation. The management has requested a circular mentioning leave encashment based on 26 days. I have consulted with some seniors who mentioned that there may not be a specific formula, but according to the Act, one Earned Leave (EL) is earned for every 20 working days. Therefore, based on this principle, we should consider 26 days when calculating earned leave encashment.

Please guide me with any circular on this matter.

Regards,
Ganesh

In general, leave encashment is calculated by considering 30 days in a month. However, in my last organization, the leave encashment calculation was very specific. We used to calculate the amount of each leave according to the per day salary of that particular month in which the leave was earned. After getting the amount of each earned leave, one can add them to get the final amount.

Hope this will help you.

Regards,
Deepti