Leave Encashment Confusion: Is It Based on Basic+DA or Last Month's Gross Salary?

Dear team, how is leave encashment calculated? Is it based on Basic+DA or on the gross salary of the last month? Please clarify.

Dear Ravichache, Yes, you have to consider the basic salary + dearness allowance.

Dear Ravi, When an unavailed portion of any accruable leave, particularly Earned Leave, is statutorily mandated to be encashable upon the termination of employment, the salary should be paid at a rate equal to the leave salary that would have been paid if the employee had actually taken the leave.

Calculation of Leave Encashment

The calculation of leave encashment can vary depending on the company's policy and the applicable laws and regulations.

In some companies, leave encashment is calculated based on the basic salary and dearness allowance (DA) of the employee. Basic salary refers to the fixed portion of an employee's salary, while DA is an allowance paid to employees to compensate for the rising cost of living.

In other companies, leave encashment may be calculated based on the employee's gross salary of the last month. Gross salary includes the employee's basic salary, allowances, and any other benefits or perks.

It is important to note that leave encashment is often subject to applicable taxes and deductions, which can further affect the final calculation.

To determine how leave encashment is calculated in your company, it is best to refer to the company's HR policies and guidelines or consult with your HR department.