Is My Leave Encashment Calculation Correct? Seeking Clarity and References

Dear Friends,

Greetings to you all,

I would need some clarity on the formula below. If Leave Encashment is calculated as follows:

(BASIC + DA) / Present Month (30 / 31) * No of EL = Payable

For example, if:

Basic - 5000
DA - 2000
Month Days - 30
Balance EL - 20

Then, the calculation would be:

(5000 + 2000) / 30 * 20 = 4666.66 (Rounded Off - 4667) is payable.

Please confirm if this calculation is correct and provide any necessary corrections with valid references to provisions or rules mentioned in any relevant books.

Thank you.

Warm Regards,

Chandra Dev
Head HR

Legally, there is no such term as Leave Encashment; it is payment of leave wages. This happens at the end of an employee's service. Some companies choose to pay off leave wages annually. Leave wages should cover all allowances in addition to basic and DA.

I hope this helps clarify the concept of leave wages for you. Let me know if you have any further questions.

Dear Mr. Chandra Dev,

The formula for EL payment is: Last Basic salary + DA / 26 * No. of EL.

For example, if:
Basic - 5000
DA - 2000
EL - 20

Then the payment would be:
(5000 + 2000) / 26 * 20 = 5385

Regards,
Rahul Sindhwani