Dear Reader,
I have the following queries:
1. In my company, unions demand to divide the monthly salary by 26 to find out the per-day salary. We currently divide by 30 or 31 days. Which is correct?
2. For leave encashment, the management gives BASIC+ DA, which forms only 56% of the gross salary. 44% consists of allowances that we exclude from the salary calculation for the above purpose. However, when we deduct salary due to loss of pay leave, we deduct the salary of all allowances and BASIC+ DA. Unions demand the leave encashment salary based on BASIC+ DA+ ALLOWANCES. Which is correct?
Kindly reply.
From India, Palakkad
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3I have the following queries:
1. In my company, unions demand to divide the monthly salary by 26 to find out the per-day salary. We currently divide by 30 or 31 days. Which is correct?
2. For leave encashment, the management gives BASIC+ DA, which forms only 56% of the gross salary. 44% consists of allowances that we exclude from the salary calculation for the above purpose. However, when we deduct salary due to loss of pay leave, we deduct the salary of all allowances and BASIC+ DA. Unions demand the leave encashment salary based on BASIC+ DA+ ALLOWANCES. Which is correct?
Kindly reply.
From India, Palakkad
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1. For Workers the wages is to be divided by excluding weekly off and for staff salary is divided by 30 or 31 days.
For Example:-
1. For the month April 13 - 30 days Weekly off (Sun) -4 Payable days -26
2. For the month May 13- 31 days Weekly off (Sun)- 4 Payable days -27
So the wages is to be divided by 26 or either by 27 days.
2.For your second query is no support of law regarding leave encashment. It’s totally depend on management to encash the leave on Bas+Da or Bas+Da+Allowances.
From India, Nasik
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For Example:-
1. For the month April 13 - 30 days Weekly off (Sun) -4 Payable days -26
2. For the month May 13- 31 days Weekly off (Sun)- 4 Payable days -27
So the wages is to be divided by 26 or either by 27 days.
2.For your second query is no support of law regarding leave encashment. It’s totally depend on management to encash the leave on Bas+Da or Bas+Da+Allowances.
From India, Nasik
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Dear Antukd,
Shri Ganesh has correctly explained the position. A worker earns wages for the time he has worked. That is why a proportionate deduction is made for the period of absence counted in hours/minutes. The Payment of Wages Act authorizes such deductions. However, as regards the salaried class, there is no deduction for lesser absence; the minimum unit is half a day, and lesser absence is condoned. The principle of 26 days equaling a month applies to workmen who are paid wages, while the 30/31 days principle applies to the salaried category like office staff. Following the directive from government audit, the leave encashment formula in PSUs, which were operating on the 26-day principle earlier, has now been changed to 30 days and is made applicable to all categories. The matter is under challenge before the High Court; hence, a final word cannot be said.
As regards leave encashment, the compensation includes only Basic + DA, and the allowances are excluded. In most cases, the allowances are actually linked to the performance of some duty. For example, conveyance is for coming on duty, washing allowance is for keeping the uniform/dress in a presentable condition while performing duty, and newspaper allowance is for purchasing newspapers. None of these conditions are met while encashing leave; hence, it is not payable.
KK
From India, Bhopal
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Shri Ganesh has correctly explained the position. A worker earns wages for the time he has worked. That is why a proportionate deduction is made for the period of absence counted in hours/minutes. The Payment of Wages Act authorizes such deductions. However, as regards the salaried class, there is no deduction for lesser absence; the minimum unit is half a day, and lesser absence is condoned. The principle of 26 days equaling a month applies to workmen who are paid wages, while the 30/31 days principle applies to the salaried category like office staff. Following the directive from government audit, the leave encashment formula in PSUs, which were operating on the 26-day principle earlier, has now been changed to 30 days and is made applicable to all categories. The matter is under challenge before the High Court; hence, a final word cannot be said.
As regards leave encashment, the compensation includes only Basic + DA, and the allowances are excluded. In most cases, the allowances are actually linked to the performance of some duty. For example, conveyance is for coming on duty, washing allowance is for keeping the uniform/dress in a presentable condition while performing duty, and newspaper allowance is for purchasing newspapers. None of these conditions are met while encashing leave; hence, it is not payable.
KK
From India, Bhopal
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Very smart union you have..!
Monthly salary to be calculated on the basis of the number of days in each month. It varies from month to month as it has a different number of days in each month. As per labor acts, only basic+DA are the mandatory allowances to be given to employees. But in fact, the salary includes other allowances also, which makes the gross quite bigger than the minimum wages. Salary means the payment made towards work done in the period of one month. A month includes normal working days and declared weekly off like Sundays and other declared holidays. It means those declared holidays are paid holidays. While we are paying for the whole 30 days, then while calculating per-day salary, we should divide the gross into the number of days we pay in a month and not for the number of days an employee works.
Again, as per labor laws, minimum wages are the mandatory thing in computing the salary. So the way you are following to calculate the Earned Leave encashment is right. It's not an employer's obligation to calculate it for the gross salary. It depends on the management as to how it tells to do it.
Further, please check with the seniors.
From India, Bangalore
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Monthly salary to be calculated on the basis of the number of days in each month. It varies from month to month as it has a different number of days in each month. As per labor acts, only basic+DA are the mandatory allowances to be given to employees. But in fact, the salary includes other allowances also, which makes the gross quite bigger than the minimum wages. Salary means the payment made towards work done in the period of one month. A month includes normal working days and declared weekly off like Sundays and other declared holidays. It means those declared holidays are paid holidays. While we are paying for the whole 30 days, then while calculating per-day salary, we should divide the gross into the number of days we pay in a month and not for the number of days an employee works.
Again, as per labor laws, minimum wages are the mandatory thing in computing the salary. So the way you are following to calculate the Earned Leave encashment is right. It's not an employer's obligation to calculate it for the gross salary. It depends on the management as to how it tells to do it.
Further, please check with the seniors.
From India, Bangalore
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Well, i think it is really tough situation to resolve. Actually, the workers are thinking from their own perspective and asking for the same.
From India, Lucknow
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From India, Lucknow
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As per Sec.4Sub. Sec.(2)of the above Act, explain the calculation of 15 days wages per year for monthly rated employee.Monthly rate of wages last drawn divided by 26 and multiply the quotient by 15.
From India, Jamshedpur
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From India, Jamshedpur
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Ours is a PSU - we do it basic+DA+Special Basic (Personal pay) divided by 26
From India, Kolkata
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From India, Kolkata
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Antkund
There is a Supreme Court judgment that says per day salary is to be computed on the basis of a 26 working day month.
That apart, there is a justification for both of the methods, 26 and 30 days.
1. 26 days rule: Payment of Wages Act, Minimum Wages Act, both require you to pay for the weekly off. Since the majority of the workers get their salary on days worked (no paid holiday given), the minimum wages notifications include week offs in the rate by dividing by 26 working days. That makes the computation of wages transparent and easier for workers to understand.
2. 30-day rule: If you are taking a 30-31 day month, then you must include all weekly offs as present and working in the computation of wages. If you do not do that, you will violate the minimum wages law of providing paid weekly off.
So in effect, there will be no difference in paying on 26 working days or 31 days including weekly off.
In terms of mathematical computation, 26 days working will save you some money. What happens in reality is not that you are paying for working days. You are actually deducting absent days. For that purpose, deduction on the 26 days rule allows you to deduct more.
E.g. If a worker gets a salary of 6000.
Absent 3 days.
Method 1: Daily rate: 6000/26: 230.75.
Absent deduction: 692.3.
Payable: 5307.
Method 2: Daily rate: 6000/30: 200.
Absent deduction: 600.
Payable: 5400.
Most unions do not realize this.
Unless, of course, you have not been paying for the weekly off, which is non-compliance.
Hope this helps. By all means, do agree to the union requests.
From India, Mumbai
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There is a Supreme Court judgment that says per day salary is to be computed on the basis of a 26 working day month.
That apart, there is a justification for both of the methods, 26 and 30 days.
1. 26 days rule: Payment of Wages Act, Minimum Wages Act, both require you to pay for the weekly off. Since the majority of the workers get their salary on days worked (no paid holiday given), the minimum wages notifications include week offs in the rate by dividing by 26 working days. That makes the computation of wages transparent and easier for workers to understand.
2. 30-day rule: If you are taking a 30-31 day month, then you must include all weekly offs as present and working in the computation of wages. If you do not do that, you will violate the minimum wages law of providing paid weekly off.
So in effect, there will be no difference in paying on 26 working days or 31 days including weekly off.
In terms of mathematical computation, 26 days working will save you some money. What happens in reality is not that you are paying for working days. You are actually deducting absent days. For that purpose, deduction on the 26 days rule allows you to deduct more.
E.g. If a worker gets a salary of 6000.
Absent 3 days.
Method 1: Daily rate: 6000/26: 230.75.
Absent deduction: 692.3.
Payable: 5307.
Method 2: Daily rate: 6000/30: 200.
Absent deduction: 600.
Payable: 5400.
Most unions do not realize this.
Unless, of course, you have not been paying for the weekly off, which is non-compliance.
Hope this helps. By all means, do agree to the union requests.
From India, Mumbai
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While for gratuity purposes, the Act itself provides for dividing by 26. For other purposes, it is better to follow what is provided for in your Standing Order or agreement with the Union.
Kumar S.
From India, Bangalore
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Kumar S.
From India, Bangalore
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Hi,
The Factories Act mandates that one paid weekly day off must be given after 6 days of work, and no worker should work more than 10 days without a day off. My logic is that if we calculate salary based on 26 days, we are excluding weekly offs (not paying for the weekly off), which means it is non-compliance. If we pay for 30 days, then we are compensating for weekly offs, leading to 100% compliance. For gratuity calculations, we should consider 26 days in a month.
Seniors, please correct me if I am wrong.
From India, Mumbai
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The Factories Act mandates that one paid weekly day off must be given after 6 days of work, and no worker should work more than 10 days without a day off. My logic is that if we calculate salary based on 26 days, we are excluding weekly offs (not paying for the weekly off), which means it is non-compliance. If we pay for 30 days, then we are compensating for weekly offs, leading to 100% compliance. For gratuity calculations, we should consider 26 days in a month.
Seniors, please correct me if I am wrong.
From India, Mumbai
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