Leave Encashment Dilemma: Should It Be Based on Current or Past Salaries?

Hi friends,

Please, someone reply to me at the soonest possible. If an employee didn't take his leave encashment for 3 years, should it be calculated as per the last salary, or will it be divided by each year's salary?

Thank you & best regards,

Hi,

First of all, you should establish the leave policy, which includes the entitlement and encashment procedures. Actually, leave encashment is payable based on the present salary.

From, Madhu

Dear Friend,

You have to calculate the leave encashment for the present basic + DA only. The formula is:

[ frac{{text{Basic + DA}}}{{26}} times text{No of days} ]

Regards,

Alphonse 😂😂😂
GT-ElectronicIndia

Hi,

If it is for the last three years' encashment, I think it should not be on the current one. Only the current year's salary details should be considered, and the rest should be according to the respective years' salary details.

For example, if the salary was Rs. 15,000/- per month in 2005 (as per the calculation for leave encashment, then it should be based on Rs. 15,000/-). If the salary increased to Rs. 20,000/- per month in 2006, then the calculation should be based on Rs. 20,000/-, and so on for 2007.

Hope this is as required.

Thanks,
Tarun

Other members, please feel free to comment.

According to THE FACTORIES ACT [Act No. 63 of 1948] As amended by the Factories (Amendment) Act, 1987

79. Annual leave with wages

(5) If a worker does not, in any one calendar year, take the whole of the leave allowed to him under sub-section (1) or sub-section (2), as the case may be, any leave not taken by him shall be added to the leave to be allowed to him in the succeeding calendar year:

Provided that the total number of days of leave that may be carried forward to a succeeding year shall not exceed thirty in the case of an adult or forty in the case of a child.

80. Wages during leave period

(1) For the leave allowed to him under section 78 or section 79, as the case may be, a worker shall be entitled to wages at a rate equal to the daily average of his total full-time earnings for the day on which he actually worked during the months immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of advantage accruing through the concessional sale to the worker of food grains and other articles.

Provided that in the case of a worker who has not worked on any day during the calendar month immediately preceding his leave, he shall be paid at a rate equal to the daily average of his total full-time earnings for the days on which he actually worked during the last calendar months preceding his leave, in which he actually worked, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the workers of food grains and other articles.

You may refer to clause 79(5) with 80(1) that will explain 30 EL can be carried forward to the succeeding calendar year. (You may notice that the number of succeeding calendar years in which leave can be carried forward and the accumulation of total EL is not mentioned here). The encashment rate would be at a rate equal to the daily average of his total full-time earnings for the day on which he actually worked during the months immediately preceding his leave, exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of advantage accruing through the concessional sale to the worker of food grains and other articles. (Means encashed at the current rate).

Dear HR friends,

I am looking for HR policies regarding leave rules, including Earned Leave (EL), Casual Leave (CL), Medical Leave, and Holidays, as per the law. Kindly suggest.

Balwant Singh