Understanding Leave Encashment: Are LLPs Required to Pay for Unused Leave When Employees Retire or Leave?

Hello, I want to know what the obligations of an LLP are in terms of leave encashment for employees. Is it mandatory to encash leaves of employees retiring or leaving? If yes, what is the calculation for the same?

Yes, it is mandatory to encash earned leaves upon separation of an employee. Please check the Factories Act or the Shop & Establishment Act, whichever is applicable to your organization.

Calculation: (Last drawn basic/30) * number of earned leaves

Regards,
Rahul

Usually, when an employee resigns or retires, the leaves will be calculated in the same manner as salaries. It depends on your company as to how many days per week you work and the calculations thereof. If it is a 5-day week, as is common in many IT sectors, the calculation for a $25,000 salary (for example) will be $25,000/20 x [the number of days worked in the month].

Encashment of leaves

Encashment of leaves in some companies is done based on the basic salary when the earned or privilege leaves exceed 60 (as per the Shops & Establishments Act) or as per the company policy.

An employee who is leaving the company must be cleared of their earned leaves, in addition to other applicable benefits.

Thanks and Regards