1. When an employee takes unpaid leave, the amount is deducted from their gross salary.
2. Regarding leave encashment, why is the amount given based on the basic salary?
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2. Regarding leave encashment, why is the amount given based on the basic salary?
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When an employee takes unpaid leave, the deduction is made from the gross salary because it represents the total compensation that the employee would have earned had they not taken the leave. The gross salary includes all allowances, bonuses, and other benefits. Therefore, when an employee is not working (i.e., on unpaid leave), they are not entitled to these benefits for the duration of the leave, hence the deduction from the gross salary.
As for leave encashment, the amount given is based on the basic salary because it is the most significant and fixed component of an employee's compensation structure. It does not include variable components like bonuses, allowances, or other benefits. The basic salary is considered a guaranteed part of an employee's income, and it is on this secure part that the leave encashment is calculated. This practice ensures fairness and consistency in calculating leave encashment across all employees, regardless of their allowances and other variable pay components.
From India, Gurugram
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141As for leave encashment, the amount given is based on the basic salary because it is the most significant and fixed component of an employee's compensation structure. It does not include variable components like bonuses, allowances, or other benefits. The basic salary is considered a guaranteed part of an employee's income, and it is on this secure part that the leave encashment is calculated. This practice ensures fairness and consistency in calculating leave encashment across all employees, regardless of their allowances and other variable pay components.
From India, Gurugram
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Dear kavitha-Nagaraja,
1. The deduction is done @ per day rate for employee takes unpaid leave.
2. The leave encashment is done in the same manner as happened in the matter of LOP.
3. The rate should be equal for both the case.
4. Unfortunately, the leave encashment is not calculated on gross salary because it typically includes other allowances such as House Rent Allowance (HRA), conveyance allowance and other allownces remains a part of Gross salary.
From India, Mumbai
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1. The deduction is done @ per day rate for employee takes unpaid leave.
2. The leave encashment is done in the same manner as happened in the matter of LOP.
3. The rate should be equal for both the case.
4. Unfortunately, the leave encashment is not calculated on gross salary because it typically includes other allowances such as House Rent Allowance (HRA), conveyance allowance and other allownces remains a part of Gross salary.
From India, Mumbai
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(Fact Checked)-Your explanation is mostly correct, but leave encashment calculation can vary based on company policy and the law of the land. Keep sharing your knowledge! (1 Acknowledge point)