Dear All, Please share your valuable input on my query. Can we pay Leave amount to Employees in his salary in place of Leave? Is it legal, If yes, then is it part of gross or CTC?
From India, Noida
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9From India, Noida
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Understanding Leave as an Employee Benefit
Leave is not part of the salary; it is an employee benefit. Within the limits prescribed by law, it is a statutory right, whereas any leave beyond what is mandated by law is considered an additional employee benefit. The law requires that leave should be taken, and therefore, encashment of leave is not allowed during an employee's service. Consequently, it is not permissible to compensate the leave amount by having the employee work without taking any leave. Such action would be viewed as compensating the employee for not utilizing their entitled leave. While this may not raise concerns when uncontested, if an employee disputes that leave was denied but compensated through encashment, it could lead to legal non-compliance.
Including Leave in Cost to Company (CTC)
Any leave entitlement exceeding the statutory minimum can be included in the Cost to Company (CTC) calculation. However, it is not permissible to include statutory leaves as part of the CTC.
From India, Kannur
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Leave is not part of the salary; it is an employee benefit. Within the limits prescribed by law, it is a statutory right, whereas any leave beyond what is mandated by law is considered an additional employee benefit. The law requires that leave should be taken, and therefore, encashment of leave is not allowed during an employee's service. Consequently, it is not permissible to compensate the leave amount by having the employee work without taking any leave. Such action would be viewed as compensating the employee for not utilizing their entitled leave. While this may not raise concerns when uncontested, if an employee disputes that leave was denied but compensated through encashment, it could lead to legal non-compliance.
Including Leave in Cost to Company (CTC)
Any leave entitlement exceeding the statutory minimum can be included in the Cost to Company (CTC) calculation. However, it is not permissible to include statutory leaves as part of the CTC.
From India, Kannur
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Madhu San, We are paying to our contractual employees leave amount on his salary monthly basis (Count in Gross ) on days basis . As per salary calculation. Is it leagly correct or not .
From India, Noida
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From India, Noida
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Understanding Contractual Employees
What do you mean by contractual employees? Are they employees on a fixed-term contract? Normally, their unavailed leave shall be encashed when their period is over, and the contract is terminated. This is permissible. However, the issue arises when a contract stipulates that no leave should be taken, but the amount of leave (encashment) will be given as compensation for not availing the leaves. Legally, this is not maintainable.
From India, Kannur
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What do you mean by contractual employees? Are they employees on a fixed-term contract? Normally, their unavailed leave shall be encashed when their period is over, and the contract is terminated. This is permissible. However, the issue arises when a contract stipulates that no leave should be taken, but the amount of leave (encashment) will be given as compensation for not availing the leaves. Legally, this is not maintainable.
From India, Kannur
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As an individual I am not in favour of Pay in lieu of Leave Leave is prescribed in Law with an idea that the employees will be away from work on certain days
From India, Chennai
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From India, Chennai
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Hi Sushil,
Understanding Leave Encashment
Leave encashment is a monetary emolument received by the employee in lieu of the leaves entitled to him but not availed by him/her. It is neither a part of the CTC nor does it come under gross pay. It can be considered as a part of termination benefits. You cannot pay leave amounts to employees in lieu of leave.
Annual Leave Entitlements
Please note that there are annual leave entitlements like 12 Casual Leave, 15 Privilege or earned leave, and 5 sick leave, totaling 30 days in a year. Only the Privilege or earned leave is encashed, and not the other leaves. Additionally, it is important to mention that other leaves are not carried forward except for Privilege leave.
Given these facts, how did you come to the conclusion that you can pay leave amounts in lieu of leave, which is not universally accepted?
From India, Bangalore
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Understanding Leave Encashment
Leave encashment is a monetary emolument received by the employee in lieu of the leaves entitled to him but not availed by him/her. It is neither a part of the CTC nor does it come under gross pay. It can be considered as a part of termination benefits. You cannot pay leave amounts to employees in lieu of leave.
Annual Leave Entitlements
Please note that there are annual leave entitlements like 12 Casual Leave, 15 Privilege or earned leave, and 5 sick leave, totaling 30 days in a year. Only the Privilege or earned leave is encashed, and not the other leaves. Additionally, it is important to mention that other leaves are not carried forward except for Privilege leave.
Given these facts, how did you come to the conclusion that you can pay leave amounts in lieu of leave, which is not universally accepted?
From India, Bangalore
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Legal Clarification on Absconding Employee, Contract Labour Engagement & Leave Entitlement Ammen.pdf
SC -PF judgment on No PF on Leave encashment.doc