Leave Payment Dilemma: Should It Be Based on Basic or Gross Salary When Employees Retire or Resign?

Please advise—when any employee retires or resigns from the service—should leave payment be based on the basic or gross salary?

Options for Calculating Leave Payment

There are two options for calculating leave payment:

1. If your salary payment is apportioned into components such as Basic, HRA, Conveyance, Medical allowance, and LTA, then the leave payment should be calculated based on the Basic salary.

2. If your salary is consolidated or fixed, then the fixed salary should be considered as the basic salary for leave payment calculation.

I hope this explanation is clear and helpful.

Sorry to differ with the view of Mr. Kumar.

Leave salary clarification

Leave salary implies the normal salary that would have been paid but for the leave, minus the special allowance, if any, granted to meet expenses likely to be incurred for the job, like conveyance allowance. The same principle applies to the encashment of earned leave (EL) on termination of employment.