Earned Leave can be encashed annually as well as at the time of separation. It depends on the company policy. Many companies give both options, but in the case of annual encashment, the employee is not allowed to encash the complete leave balance. They have to keep a certain number of leaves in their leave balance for the current year.
On the other hand, in the case of separation, he/she can encash the complete leave balance.
Annual Leave as regulated by the Factory Act states the following:
Calculation for Adults
One day for every twenty days of work performed by an individual during the previous calendar year.
Carry Forward
30 days in the case of adults.
Leave Encashment
1. A fraction of leave of half a day or more should be considered as full, while less than half a day should not be considered.
2. The entire leave balance should be paid during normal separation or termination.
PS: The Factory Act does not specify whether payment should be on Basic or Gross salary. Please refer to the Factory Act for better clarification.
Yes, you can pay it only on basic. But the only thing you need to consider is, Basic should be more than minimum wages (Basic + DA), and the same has to fall under your leave policy.
If your company falls under shops and establishment, then you need to check the applicability in your state's Shops Act.
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