How Do You Calculate Earned Leave Encashment for Full and Final Settlement?

Hi all, I hope you are in good health. I have been serving as the HR Manager at an IT software company for 7 years. Our company operates under the Shop & Establishment Act, and I would like to clarify the correct calculation for earned leave encashment during an employee's full and final settlement.

Earned Leave Encashment Calculation

Is it (basic + DA)/26 * number of earned leave days or (basic + DA)/30 * number of earned leave days? Please advise.

Thank you.

Since the employees in your company are not daily rated, you may adopt the second calculation in your post.

Division of Basic Salary for Gratuity

Division of basic salary plus DA by 26 days to arrive at the per diem average is correct for gratuity purposes. However, for other purposes, it is advisable to use a 30-day average.

Thanks for the valuable response. Is this mentioned under the Shop & Establishment Act? If yes, please help me by indicating which section it is in.

Thanks, I am looking for the EL Encashment rule under the Shop & Establishment Act?

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Thanks for your query. I understand that you are seeking information about the EL Encashment rule under the Shop & Establishment Act. Let me provide you with the details you need.

Understanding Earned Leave (EL)

Under the Shop & Establishment Act, EL typically stands for Earned Leave. It is a type of leave provided to employees based on their length of service. The rules regarding Earned Leave can vary depending on the specific provisions outlined in the Act relevant to your region or establishment.

How to Obtain Detailed Information

To obtain detailed information about the EL Encashment rule and its application to your situation, I recommend reviewing the official guidelines provided by the governing body responsible for enforcing the Shop & Establishment Act in your area. If you require further assistance or clarification on this matter, feel free to ask, and I will be happy to help.