Dear All,
I am working with a manufacturing company in Gurgaon. Until now, we have been calculating earned leave (EL) based on the Gross salary. However, our directors are now instructing us to calculate EL based on Basic salary. Kindly assist me with this.
Harry
From India, Delhi
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3I am working with a manufacturing company in Gurgaon. Until now, we have been calculating earned leave (EL) based on the Gross salary. However, our directors are now instructing us to calculate EL based on Basic salary. Kindly assist me with this.
Harry
From India, Delhi
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EL shall be applicable on the gross salary. There is always reasoning and rationale behind any law. Suppose the employee is coming to the office, he shall receive the complete salary including all allowances such as HRA, Conveyance, Medical, etc. If he is on leave, then whether he will not receive HRA or other allowances. It should be based on the gross salary instead of Basic.
From India, Delhi
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From India, Delhi
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it can be paid in any foam mean it can be on basic & gross both but the taxability would be applicable on gross because as per law exemption can be given only on basic not on gross.
From India, New Delhi
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From India, New Delhi
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Dear Harry,
It is a matter of confusion. EL has been a long-time calculation in basic. Why? Here are the facts:
Basic >= Minimum wages per day * Total number of days present. For example, if the minimum wage is 170, then the basic per month is 4420.
So, all other allowances that you give him are actually helping him to come to this company to work. For instance, HRA. In order for him to come and work in an organization, he needs to have shelter. Therefore, you pay him for his shelter. It is additional money you give him to come and work. Only basic wages are the salary that you give for the work done.
If an employee is on leave, then he has not worked. Thus, you automatically cut his allowance too. So why pay him his house rent if he hasn't come for work? I hope I was not arrogant towards the employee's side.
Regards,
Yashwanth R HR Associate SKY Technologies
From India, Bangalore
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It is a matter of confusion. EL has been a long-time calculation in basic. Why? Here are the facts:
Basic >= Minimum wages per day * Total number of days present. For example, if the minimum wage is 170, then the basic per month is 4420.
So, all other allowances that you give him are actually helping him to come to this company to work. For instance, HRA. In order for him to come and work in an organization, he needs to have shelter. Therefore, you pay him for his shelter. It is additional money you give him to come and work. Only basic wages are the salary that you give for the work done.
If an employee is on leave, then he has not worked. Thus, you automatically cut his allowance too. So why pay him his house rent if he hasn't come for work? I hope I was not arrogant towards the employee's side.
Regards,
Yashwanth R HR Associate SKY Technologies
From India, Bangalore
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Dear Harry,
The calculation of leave encashment is always based on the basic salary because other components support the basic salary. Therefore, there is no need to include payment for other supportive components.
I agree with Mr. Yashwanth.
Chill HR
[Facebook link: https://www.facebook.com/HRGang]
From India, Gurgaon
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The calculation of leave encashment is always based on the basic salary because other components support the basic salary. Therefore, there is no need to include payment for other supportive components.
I agree with Mr. Yashwanth.
Chill HR
[Facebook link: https://www.facebook.com/HRGang]
From India, Gurgaon
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Let's assume that I am on leave for four days and apply for EL for these 4 days of leave. Here, I will get the entire four days off, which I believe will be equal to my four days of gross salary (FULL SALARY) not basic. My point is when it comes to calculations, you are advising me to base it on Basic, but for the purpose of leave, I consider it as full day's salary. This is what I am unable to understand.
From India, Delhi
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From India, Delhi
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Dear Harry,
What I suggested in my last post is the same as what the majority of organizations are following. During the working period, if one needs EL (earned leave), it means a full-day salary, not just the basic pay. However, leave encashment entirely depends on the company's policy.
Case 1: If the company policy states that the company will deduct/pay the notice period based on the basic salary, then the leave encashment must also be calculated based on the basic salary.
Case 2: If the notice period deduction/payment is based on the Gross Salary, then the leave encashment must be calculated on the Gross salary only.
The policy regarding leave encashment is completely dependent on the notice period, and this should be clearly defined at the beginning with the office policy, rather than being determined at the time of encashing leaves and trying to find a way out.
Chill HR!!
https://www.facebook.com/HRGang
From India, Gurgaon
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What I suggested in my last post is the same as what the majority of organizations are following. During the working period, if one needs EL (earned leave), it means a full-day salary, not just the basic pay. However, leave encashment entirely depends on the company's policy.
Case 1: If the company policy states that the company will deduct/pay the notice period based on the basic salary, then the leave encashment must also be calculated based on the basic salary.
Case 2: If the notice period deduction/payment is based on the Gross Salary, then the leave encashment must be calculated on the Gross salary only.
The policy regarding leave encashment is completely dependent on the notice period, and this should be clearly defined at the beginning with the office policy, rather than being determined at the time of encashing leaves and trying to find a way out.
Chill HR!!
https://www.facebook.com/HRGang
From India, Gurgaon
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Dear Harry, Good Morning...!!! All leaves are always calculated on Basic + DA, not on Gross Salary... Leave Encashment = Basic + DA /30 X No. of Leaves. It includes SL, PL & CL. Regards, Vani M HR
From India, Bangalore
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From India, Bangalore
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Dear Vani,
Are you sure that "It includes SL, PL & CL"? Only EL or we can say PL (Earned Leaves or Privilege Leave) will encash, not CL (Casual Leaves) and SL (Sick Leave) if I am not mistaken. Chill HR!!
https://www.facebook.com/HRGang
From India, Gurgaon
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Are you sure that "It includes SL, PL & CL"? Only EL or we can say PL (Earned Leaves or Privilege Leave) will encash, not CL (Casual Leaves) and SL (Sick Leave) if I am not mistaken. Chill HR!!
https://www.facebook.com/HRGang
From India, Gurgaon
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There had been repeated posts on this subject. Detailed discussions have taken place in this forum on this subject. However, I am repeating certain points as it has come up for discussion once again:
1. When an employee is availing leave, whether it is earned leave, casual leave, or sick leave, their full salary is given. If an employee's basic salary is Rs 1000 and their other allowances are Rs 1000, then they receive the basic salary plus other allowances in full when they avail leave with pay.
2. When an employee receives encashment of leave, generally basic salary plus DA are given. The argument here is that when an employee avails encashment, their HRA and other allowances are already included in the salary. The logical argument is that there is no need to pay the same amount twice.
From India, Chennai
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1. When an employee is availing leave, whether it is earned leave, casual leave, or sick leave, their full salary is given. If an employee's basic salary is Rs 1000 and their other allowances are Rs 1000, then they receive the basic salary plus other allowances in full when they avail leave with pay.
2. When an employee receives encashment of leave, generally basic salary plus DA are given. The argument here is that when an employee avails encashment, their HRA and other allowances are already included in the salary. The logical argument is that there is no need to pay the same amount twice.
From India, Chennai
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(Fact Checked)-The user's reply contains accurate information regarding the calculation of leave encashment based on Basic and DA. The explanation provided is correct. (1 Acknowledge point)
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CiteHR.AI
(Fact Checked)-The calculation of Earned Leave (EL) based on Basic salary is a common practice in many organizations as per labor laws. EL should be calculated on Basic salary, not Gross salary. (1 Acknowledge point)