For calculating leave encashment, we divide the monthly salary (basis + DA) by 30 and multiply it by the number of earned leaves to the credit of the employee. Monthly Salary X No. Earned Leaves / 30... where is this 30 coming from? No Act prescribes this specifically. Why not Annual Salary / 365 X Number of Earned leaves?
From India, Bangalore
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1From India, Bangalore
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Dear Deepak, the way you are calculating is wrong, and the way you are suggesting is also incorrect. Leave encashment should be calculated as follows:
Monthly salary divided by 26, then multiplied by the number of leave days to be encashed. Now, you may be wondering where the number 26 comes from. One day's salary is equal to the monthly salary divided by 26. This calculation is based on the Minimum Wages Act, which specifies how to determine one day's salary.
I hope this clarifies the calculation method for you. Let me know if you have any further questions.
From India, Delhi
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Monthly salary divided by 26, then multiplied by the number of leave days to be encashed. Now, you may be wondering where the number 26 comes from. One day's salary is equal to the monthly salary divided by 26. This calculation is based on the Minimum Wages Act, which specifies how to determine one day's salary.
I hope this clarifies the calculation method for you. Let me know if you have any further questions.
From India, Delhi
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Dear JS Malik, thank you very much. However, my doubt still persists. VK Singhania's (Income tax practice) book suggests the following formula to calculate the exemption value of leave salary:
(Number of completed years x Number of leaves earned) - (Number of leaves utilized during the employment) / 30, multiplied by the Monthly Salary (last 10 months average salary).
It is noted that a month is considered as 30 days in this calculation. The Central Civil Service (Leave) Rules, which are applicable to central government employees, also use a month as 30 days for their calculations. I am unsure why these departments prescribe this practice when no act clearly mentions it.
From India, Bangalore
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(Number of completed years x Number of leaves earned) - (Number of leaves utilized during the employment) / 30, multiplied by the Monthly Salary (last 10 months average salary).
It is noted that a month is considered as 30 days in this calculation. The Central Civil Service (Leave) Rules, which are applicable to central government employees, also use a month as 30 days for their calculations. I am unsure why these departments prescribe this practice when no act clearly mentions it.
From India, Bangalore
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Dear sirs,
If you calculate leave encashment of daily wagers, you have the daily rate of wages as announced by the State Govt. or the total of MONTH'S Basic salary + DA + VDA if any divided by 26. Suppose MW is Rs. 300 per day and you have to pay 10 days encashment, the answer is 300 x 10 = Rs. 3000. In another case, suppose Basic + DA is Rs. 7800 per month, then for 10 days leave encashment, the amount payable is 7800 / 26 x 10 = Rs. 3000.
In case you want to calculate employees' salaries, consider your management staff who are mostly monthly rated. For example, if the basic salary, with no DA/VDA, is Rs. 15,000 per month, then divide Rs. 15,000 by 30 or the actual number of days in the month to get one day's salary. For 15000 / 30 = Rs. 500 for one day, then multiply it by the number of leave days.
When I was the HEAD-HR, I used to calculate like this: Rs. 15000 x 12 x no. of leaves divided by 365 days. 365 days are the days in that particular year the employee is exiting. The justification was that there are 28 or 29 / 30 / 31 days in 12 months of any year, but there are only 365 or 366 days. People were mostly observed to be more satisfied by the second-last formula.
Regards,
RDS Yadav
Labour Laws Advisor
From India, Delhi
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If you calculate leave encashment of daily wagers, you have the daily rate of wages as announced by the State Govt. or the total of MONTH'S Basic salary + DA + VDA if any divided by 26. Suppose MW is Rs. 300 per day and you have to pay 10 days encashment, the answer is 300 x 10 = Rs. 3000. In another case, suppose Basic + DA is Rs. 7800 per month, then for 10 days leave encashment, the amount payable is 7800 / 26 x 10 = Rs. 3000.
In case you want to calculate employees' salaries, consider your management staff who are mostly monthly rated. For example, if the basic salary, with no DA/VDA, is Rs. 15,000 per month, then divide Rs. 15,000 by 30 or the actual number of days in the month to get one day's salary. For 15000 / 30 = Rs. 500 for one day, then multiply it by the number of leave days.
When I was the HEAD-HR, I used to calculate like this: Rs. 15000 x 12 x no. of leaves divided by 365 days. 365 days are the days in that particular year the employee is exiting. The justification was that there are 28 or 29 / 30 / 31 days in 12 months of any year, but there are only 365 or 366 days. People were mostly observed to be more satisfied by the second-last formula.
Regards,
RDS Yadav
Labour Laws Advisor
From India, Delhi
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Mr. RDS Yadav,
Your 1st, 2nd, and 3rd paragraphs are very accurate. You could also state that it is as per the provisions of different statutes. However, the last paragraph is confusing. Was this practice followed in your organization? How can one be satisfied with this calculation of 365 days and why?
I would appreciate it if you could provide more words or lines based on your past experiences.
Thank you.
From India
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Your 1st, 2nd, and 3rd paragraphs are very accurate. You could also state that it is as per the provisions of different statutes. However, the last paragraph is confusing. Was this practice followed in your organization? How can one be satisfied with this calculation of 365 days and why?
I would appreciate it if you could provide more words or lines based on your past experiences.
Thank you.
From India
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If you are paying wages / salary including week off then you can calculate everything based on 30 days otherwise only by 26 days.
From India, Bangalore
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From India, Bangalore
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In general in almost statute the payment of leave with wages or encashment and payment of over time wages will be divided by only 26 in almost all enactments. Adoni Suguresh Labour Laws Consultant
From India, Bidar
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From India, Bidar
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Dear All,
My query is a little different from the above but related to the subject of Leave encashment. I need advice as per the Factory Act. Which components (Gross or Basic+DA) are covered for leave encashment of daily wage workers? As per practice, they are not entitled to leave, and after completion of a year or during separation, they are eligible for encashment of leave based on the calculation of 1/20 present. To calculate the number of leave days, we have no issue; the only query is related to the calculation of the amount for payment of Leave encashment.
From India, Surat
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My query is a little different from the above but related to the subject of Leave encashment. I need advice as per the Factory Act. Which components (Gross or Basic+DA) are covered for leave encashment of daily wage workers? As per practice, they are not entitled to leave, and after completion of a year or during separation, they are eligible for encashment of leave based on the calculation of 1/20 present. To calculate the number of leave days, we have no issue; the only query is related to the calculation of the amount for payment of Leave encashment.
From India, Surat
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Sirs and Madams,
Thank you for all the responses. Let me please reiterate the real doubt that I have - If I am applying 30 days for calculating the number of days in a month - which law/statute/rule/circular/notification etc. states that?
Your prompt attention to this matter is greatly appreciated.
Thank you.
From India, Bangalore
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Thank you for all the responses. Let me please reiterate the real doubt that I have - If I am applying 30 days for calculating the number of days in a month - which law/statute/rule/circular/notification etc. states that?
Your prompt attention to this matter is greatly appreciated.
Thank you.
From India, Bangalore
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(Fact Checked)-The calculation method mentioned in the original post is based on a common practice. While there may not be a specific law mandating it, it is widely used in organizations for simplicity and consistency. (1 Acknowledge point)
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LEAVE ENCASHMENT NOT INCLUDED IN WAGES FOR P. F. CALCULATION.pdf
Leave Encashment & Salary Calculation.xls x
CiteHR.AI
(Fact Checked)-The calculation of leave encashment based on dividing monthly salary by 30 is a common practice for simplicity and not mandated by law. Using Annual Salary/365 X No. of Earned Leaves is also acceptable. (1 Acknowledge point)