Please suggest leave encashment should be calculated on full monthly salary or Basic salary?

I am doing a survey on the leave encashment policy. Please suggest leave encashment should be calculated on full monthly salary or Basic salary?
My company has 70 employees. I want to know what other companies of similar employee sizes are following.

Dear Preeti,
"Leave encashment" literally and actually means the surrender of leave at credit for cash benefit. In stead of surrendering the leave, if the employee actually goes on authorised leave, how will you calculate and pay the salary for the leave period? only basic? Logically and legally not. If any other similar employer follows such a practice, it is certainly illegal and any illegal practice cannot be a precedent to be followed.
Therefore, leave encashment should be based on the monthly gross salary minus special allowance, if any, paid to defray certain expenses to be incurred by the employee due to the nature of his job.

Hi
It is not mandatory for any organization to give leave encashment under any Law.
Usually, there are three types of leaves viz. Casual Leave (CL), Sick Leave (SL) and Earned Leave (EL). Most of the Companies give leave encashment only on the EL. There are certain accumulation limits for both SL (say 30 days) and EL (say 30 or 60 or 90 days) depends upon the organization. The main purpose of providing accumulation limit is in case an employee resigns, the leave can be adjusted against the notice period either partly or fully. If at all encashment is given, most of the organizations give only on Basic Pay.
Regards
A B Srinivasan

Leave encashment during service is not provided in the Factories Act os Shops Act.But it is provided under the OSH Code.

Hi Preeti,
Leave Encashment policy differs from company to company, there's no fixed pattern on which component an employee should be paid but majority of companies pay on Per day gross basis and again the leave encashment amount is also taxable in case the yearly package goes beyond tax exemption bracket.

I do agree with the contention that there is no statutory compulsion to give leave encashment while the employee is in service. But on termination of employment, payment of salary for the no of days of EL at the credit is the statutory obligation and it forms part of the F&F Settlement.