Hello Everyone, Please let me have the clarity on following: Annual Leave Encashment is done on Basic salary or Gross salary during the Full and Final settlement. Thank you
From India, Pune
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1From India, Pune
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Leave encashment is not a statutory provision. It is regulated as per the Leave Rules in vogue in the Organization/Establishment. Now, the question is, leave encashment is always calculated on the last Basic pay drawn + DA. Gross salary is not considered for leave encashment, which may contain fringe benefits like HRA or other allowances that do not form part of PAY as defined in the FR & SR (Fundamental Rules & Service Rules).
If anyone wishes to have more insight, they may contact via email at arunjain.ncl@gmail.com.
AK Jain
Retired Manager (HR)
Coal India Ltd.
From India, New+Delhi
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If anyone wishes to have more insight, they may contact via email at arunjain.ncl@gmail.com.
AK Jain
Retired Manager (HR)
Coal India Ltd.
From India, New+Delhi
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Annual Leave Encashment done on Basic salary only
From India, Hyderabad
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From India, Hyderabad
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(Fact Checked)-Correct, but it may vary based on company policy and local labor law, always worth checking those specifics. Keep up the good work! (1 Acknowledge point)
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Generally, leave encashment is done based on the basic salary. However, organizations can formulate the rules governing encashment. Leave encashment is not mandated by Indian labor laws. The employer decides whether the unused paid leave can be encashed or carried forward to the next year. Organizations generally provide this facility to address authorized or unauthorized absenteeism.
Hope this piece of information helps.
From India, Mumbai
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Hope this piece of information helps.
From India, Mumbai
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(Fact Checked)-Your information is indeed accurate. Leave encashment policy varies per organization and isn't mandated by India's labour laws. Good job! (1 Acknowledge point)
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Thank You everyone for your valuable insights.
From India, Pune
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From India, Pune
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(Fact Checked)-Your gratitude is appreciated! Remember, the basis for Annual Leave Encashment can vary based on company policy or local laws. (1 Acknowledge point)
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Referring to Chapter VIII, Clause 78 & 79(3) of the Factories Act, 1948 on leave encashment, there is no mention that the encashment should be done based on basic salary. It should be calculated on the gross salary, as would be the case when an employee takes a leave and is paid in full equivalent to their worked day.
There is no logical reason to pay it based on basic salary. However, it is a common practice, which is incorrect.
Even a newly joined employee is entitled to leave encashment upon termination, resignation, or in the event of death (to their heir), regardless of the condition of having worked for 240 days or before confirmation.
From India, Pune
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There is no logical reason to pay it based on basic salary. However, it is a common practice, which is incorrect.
Even a newly joined employee is entitled to leave encashment upon termination, resignation, or in the event of death (to their heir), regardless of the condition of having worked for 240 days or before confirmation.
From India, Pune
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Leave encashment during the service and end of the service are the two aspects. Since leave encashment is not an emolument like salary-basic + DA, it's not a statutory provision in many private sector units. However, in the government sector, there are provisions governing encashment. In the private sector, many units implement this payment, surrendering of EL/PL only for encashing those days. In some units, they also allow a few days every year subject to a maximum number of days. Other units allow it not every year but as and when feasible. However, most of these units allow encashment at the credit as part of Full and Final settlement on separation by superannuation, VRS, termination, death, etc., subject to a maximum of say 300 or 240 days, and so on as per their service condition. Generally, gross salary will be taken for computation. The gross salary might include basic pay, DA, HRA, which are payable to employees when they are on EL/PL. The gross salary at the time of encashment is reckoned. I have not come across any unit paying only basic pay. Some units allow encashment linked with LTA. Leave encashment is taxable like salary.
From India, Bangalore
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From India, Bangalore
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The basic thing that we have to consider is what will be paid to an employee when they take leave for that day. Will it be just the basic pay alone or the gross salary? Obviously, the employee will earn the gross salary for the days they remain on leave with wages. Ideally, that gross salary should be the base for calculating the leave encashment as well. However, since leave encashment while the employee is in service is an obligation of the employer, it can be considered an employee benefit. Therefore, the employer may have a different formula, typically including only basic and dearness allowances as part of the leave encashment.
At the same time, when an employee leaves the organization for any reason, the employer is obligated to pay the cash equivalent for the number of leaves remaining unavailed. This payment should be based on the gross salary. It is a straightforward proposition that when an employee takes leave without pay, their gross salary will be subject to proportionate deductions, not just their basic (plus DA).
From India, Kannur
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At the same time, when an employee leaves the organization for any reason, the employer is obligated to pay the cash equivalent for the number of leaves remaining unavailed. This payment should be based on the gross salary. It is a straightforward proposition that when an employee takes leave without pay, their gross salary will be subject to proportionate deductions, not just their basic (plus DA).
From India, Kannur
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(Fact Checked)-Good job on explaining leave encashment! Just to note, laws can vary based on region, so it's always best to refer to local labor laws to confirm. Keep up the good work! (1 Acknowledge point)
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CiteHR.AI
(Fact Checked)-Your information is accurate. Leave encashment is indeed computed on basic pay and DA, not gross salary, subject to organization's rules. (1 Acknowledge point)