Calculation of Average Daily Wages and Salary
Average daily wages/salary varies from Act to Act and situation to situation. For the purpose of calculating gratuity payable, the average daily rate of salary is arrived at by dividing the total salary by 26. The salary for the purpose of deciding the compensation payable on retrenchment may be calculated by dividing the monthly salary by 30. There are differences of opinion among the judges in this matter. In Trade Wings Ltd Vs Prabhakar Dattaram Phodkar [1993(III) LLJ(Suppl)299 Bom], it was decided that retrenchment compensation under section 25F should be calculated by dividing the monthly salary by 26 and not by 30. However, in a later judgment, [Guru Jambheshwar University, Hisar Vs Dharam Pal (2007) 1 LLJ 1006 (SC)], it was determined that the average pay under section 25F of the ID Act means wages paid in the 3 months immediately preceding retrenchment divided by 3, and the principle of 26 days followed for the calculation of gratuity under the Payment of Gratuity Act is not applicable for the determination of retrenchment compensation.
Wages for Calculating Overtime and Leave Encashment
For calculating overtime wages, it is monthly wages divided by 26. Similarly, for calculating leave encashment, you should take monthly wages divided by 26.
None of the above will be applicable to persons in a managerial capacity.