Paid Leave Dilemma: Should We Include Allowances or Just Basic Salary?

Dear friends,

Please, someone reply to me at the earliest possible.

Based on our company employees' contract, the salary will be divided into two separate parts: 1 - basic and 2 - allowances. It is mentioned that, for example, if the employees have 21 days of paid leave, should we pay them for the full 21 days, meaning basic plus allowances, or should the leave salary be calculated based on the basic salary, which is 65% of the total amount?

Please advise at your earliest convenience.

Thank you.

Hi friend,

If an employee is taking paid leave, then they are eligible for the whole salary, meaning they will receive both their basic pay and allowances. However, in the case of leave encashment, in most companies, only the basic salary is encashed, and allowances are not.

Regards,
Vidya Nair

Thank you for your swift response. However, what if some employees took unpaid leave because they didn't complete one year with us, and after one year, they claimed their encashment? (As per the company's policy, employees are not entitled to take paid leave during the first year).

I am eagerly awaiting your response.

Best regards,

Dear Vidya,

What if some employees took unpaid leave because they didn't complete one year with us, and after one year, they requested their encashment? (As per the company's policy, employees are not entitled to paid leave during the first year.)

Awaiting your response.

Thank you.

Hi, I am Satyanarayana.

With regard to your query regarding leave encashment, Basic pay and DA are only paid for leave encashment. If DA is not specifically mentioned in the pay package, no other allowances need to be paid. Basic pay only will qualify for Leave Encashment.

Have a good day.
Satyanarayana