1. Sir, so far as I understand, the term "leave encashment" means the payment of wages to the employee in lieu of earned leaves which he/she has earned in a selected period i.e. at the close of a year or at the time of retirement or leaving of job etc. In general, leaves of the type called "earned leaves" only are allowed to be encashed by organisations. In Central Govt., accumulated earned leaves or half pay leaves are allowed to be encashed at the time of retirement upto some limit and the same also forms part of retiral benefits. In some PSUs, encashment of leaves are also allowed once in a block of 2 or 4 years when the employee avails Leave Travel Concession (LTC).
2. The accumulation of such earned leaves may be as a result of statutory provisions of the Factory Act, the Shop and Commercial Establishment Act (of the concerned State) or service rules of the establishment. I think, in all such enactments/rules, the encashment of leaves are allowed lump-sum after close of a period viz. year etc.as mentioned by me above. I have not come across a situation in which the unavailed leaves accumulated every month are allowed to be encashed every month. If this is the situation, there will be no leave due when on any future date the employee will actually need leave. I am also doubtful whether such practice of allowing leave encashment every month or quarter is allowed in labour laws as mentioned above. I will request the initiator of this thread to kindly indicate more details on such leaves, viz.period of such leaves, nature of such leaves etc.which are to be encashed on every month or in a quarter for which comments are sought from seniors and experts of this forum to suggest ways to avoid payment of ESI contribution on such wages of encashment of leaves.