Hi It is calculated on gross. Since leave encashment is given as an alternative for compensatory off where ever it is not possible to give leave. ( Say Too much work load or lack of qualified hands ) Regards, GS
From India
6From India
Hi, Normally the Leave encashment is calculated on basic salary of an employee (where DA is nor applicable), however the PF deduction on the amount is mandatory. S S Sinha
From India, New Delhi
From India, New Delhi
Hi All, Leave encashment iscalcuated on Basic + City compensatery allowans\ce and theproductivity Incentive, is this according to the law? If not how Law affetcts? Shweta
Can yoiu tell me in which nrules mention that Basic + DA should be considered for the calculartion of leave encashment?
Leave encashment is to be made according to a fromula formulated by the company. In the absence of any specific formula Basic wages + Dearness Allowance shall be divided by 26 to get daily average salary which shall be multiplied by the number of days to get the sum payable. Remember that provident fund should not be deducted from the leave encashed amount since the amount an employee receives by encashing his leave will not form part of wages as was decided by the Supreme Court in Manipal Academy of Higher Education's case. Regards, Madhu.T.K
From India, Kannur
From India, Kannur
Dear Madhu, In my company which is newly established MNC the formulae is only Basic salary. Do we also need to pay PF over and above Basic as per your view. Please clarify. REgards, Navneet
Mr. Navneet, The thread relates to leave encashment and in some postings I find views supporting deduction of PF from the amount paid by way of leave encashed. My posting was to show light on the recent SC verdict on PF deduction on leave encashment. My post was no way related to basic salary and contribution to PF. If you do not have DA system then the basic salary alone will qualify for deduction of PF. In case of leave encashment also, the sum payable will be decided according to the basic salary only. Regards, Madhu.T.K
From India, Kannur
From India, Kannur
Hi Anuradha, Every company follows his rule for leave encashment. But at general it was like that. Encashment will be done in two cases:- i) at the time of separation or retirement from the company; ii) Earned leaved more than their specified limit. In our company we follows the following method:- 1) During service:- Monthly Salary(Basic+D.A.)/30 days* Leave Balances Note:- Excess of 30 days will be considered as leave balance, which eligible for encashment. Illustration:- Basic Salary Rs.10,000 + D.A. Rs. 5,000 i.e. Rs. 15,000/-(Deduct the P.F. amount if any) Denominator will be 30 days and leave over the 30 is suppose 5 days will be taken for leave balance figure: =>15000/30*5 =>2,500/- Note:- The denominator will be generally taken 26 days in case of 6 working days a week and 22 days in case of 5 working days a week. Which is generally not in the process of Indian companies. My personal mail id is 
, for any further query. Kind Regards Mannu Negi
From India, Delhi
From India, Delhi
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
SC -PF judgment on No PF on Leave encashment.doc
EPFO Circular Leave Encashment.jpg