Please help understand if the leave encashment during separation should be calculated on Gross salary or basic salary.
From India, Mumbai
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1From India, Mumbai
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Hi During separation the leaves are calculated on the gross and not basic. It is not the same as encashment during your period of employment. Thanks and Regards
From India, Hyderabad
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From India, Hyderabad
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Dear Aks Would appreciate, if you can support your calcification here above with legal provisions etc. Shailesh Parikh 99 98 97 10 65 Vadodara
From India, Mumbai
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From India, Mumbai
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Dear Friends,
Leave encashments are calculated on basic salary only. It is at the discretion of the employer to do it on the Gross salary too; however, provisions and actuarials for leave encasement are done on the assumption that leaves at the time of separation will be encashed on basic salary alone. If there is any circular or law that says leave encashment at the time of exit should happen on the Gross salary, please share.
Regards,
Rahul
From India, Delhi
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Leave encashments are calculated on basic salary only. It is at the discretion of the employer to do it on the Gross salary too; however, provisions and actuarials for leave encasement are done on the assumption that leaves at the time of separation will be encashed on basic salary alone. If there is any circular or law that says leave encashment at the time of exit should happen on the Gross salary, please share.
Regards,
Rahul
From India, Delhi
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Hi,
CHAPTER VII
Leave, Holidays with Wages, and Insurance Scheme for Employees
30. Leave:
Every employee who has served for a period of two hundred and forty days or more during a continuous period of twelve months in any establishment shall be entitled, during the subsequent period of twelve months, to leave with wages for a period of fifteen days, provided that such leave with wages may be accumulated up to a maximum period of sixty days. Every employee who has served for a period of not less than two hundred and forty days during a continuous period of twelve months in any establishment shall be entitled to the encashment of eight days of leave with wages that have accrued to him under subsection (1) during the subsequent period of twelve months. The employer shall pay to the employee the wages for the leave so encashed by the employee within a week of receipt of the application for such encashment from the employee. Leave with wages is supposed to be full salary and not basic unless it is specified as such.
Hope this answers Mr. Parikh. This information is taken from the Shops and Establishments Act of Andhra Pradesh, and even Telangana follows the same regulations as mentioned above (Page 16/17 of the Act).
Thanks and Regards
From India, Hyderabad
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CHAPTER VII
Leave, Holidays with Wages, and Insurance Scheme for Employees
30. Leave:
Every employee who has served for a period of two hundred and forty days or more during a continuous period of twelve months in any establishment shall be entitled, during the subsequent period of twelve months, to leave with wages for a period of fifteen days, provided that such leave with wages may be accumulated up to a maximum period of sixty days. Every employee who has served for a period of not less than two hundred and forty days during a continuous period of twelve months in any establishment shall be entitled to the encashment of eight days of leave with wages that have accrued to him under subsection (1) during the subsequent period of twelve months. The employer shall pay to the employee the wages for the leave so encashed by the employee within a week of receipt of the application for such encashment from the employee. Leave with wages is supposed to be full salary and not basic unless it is specified as such.
Hope this answers Mr. Parikh. This information is taken from the Shops and Establishments Act of Andhra Pradesh, and even Telangana follows the same regulations as mentioned above (Page 16/17 of the Act).
Thanks and Regards
From India, Hyderabad
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Dear Aks17,
Please check the definition of wages in section 2 of the same act. Wages don't include any allowance, reimbursement, or other benefits; while gross salary comprises allowances, reimbursements, OT, etc.
Hope this clarifies.
Regards,
Rahul
From India, Delhi
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Please check the definition of wages in section 2 of the same act. Wages don't include any allowance, reimbursement, or other benefits; while gross salary comprises allowances, reimbursements, OT, etc.
Hope this clarifies.
Regards,
Rahul
From India, Delhi
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Hi,
The points mentioned by you pertain to the work actually done - OT, any other allowance, etc., during a particular period. If you calculate that, it becomes double payment for the same work, which is not the way it is intended to be. Also, where does it mention that the leave has to be calculated on the basic salary?
Gross salary may include allowances, but that does not make excluding them from the basic salary. Salaries for encashment include all that is payable as if an employee works under normal circumstances. You do not get OT and/or reimbursement under normal circumstances; it is job/work-specific.
Thanks and Regards.
From India, Hyderabad
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The points mentioned by you pertain to the work actually done - OT, any other allowance, etc., during a particular period. If you calculate that, it becomes double payment for the same work, which is not the way it is intended to be. Also, where does it mention that the leave has to be calculated on the basic salary?
Gross salary may include allowances, but that does not make excluding them from the basic salary. Salaries for encashment include all that is payable as if an employee works under normal circumstances. You do not get OT and/or reimbursement under normal circumstances; it is job/work-specific.
Thanks and Regards.
From India, Hyderabad
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As I mentioned earlier, usually, leave encashment is done on Basic (+DA if it applies) salary; however, it is at the discretion of the employer to do it on gross too. Going by the definition of wages, section 2(23).e(v), (vii) of the aforementioned act mentions that wages don't include any special allowances or house rent allowance. Hence, according to the law, leave encashment can't be done gross if it includes special allowance or HRA. Yet the law doesn't forbid employers from passing additional benefits to the employees.
Regards,
Rahul
From India, Delhi
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Regards,
Rahul
From India, Delhi
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Leave encashment is only eligible for leave that is paid, named as Earned Leave/Privilege Leave/Paid Leave. The amount should be calculated based on Gross Salary, as per the Shop & Establishment Act. It is clearly mentioned that it is calculated on full wages, and the definition of wages is defined by the Minimum Wages Act, 1948.
Normally, under the Shop & Establishment Act, the maximum leave that can be encashed is 40-45 days, depending on the state. Under the Sales Promotions Employee Act, the maximum leave that can be encashed is 120 days. The calculation is based on the last Gross salary drawn.
From India, Hyderabad
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Normally, under the Shop & Establishment Act, the maximum leave that can be encashed is 40-45 days, depending on the state. Under the Sales Promotions Employee Act, the maximum leave that can be encashed is 120 days. The calculation is based on the last Gross salary drawn.
From India, Hyderabad
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Dear friends,
"Wages" is a comprehensive term including the entire package of compensation payable to an employee for the work done by him at the end of the predetermined wage period. Therefore, it would generally include the allowances given in the form of fringe benefits. Whenever the employer has the necessity to compensate the employee for any given period in lieu of his work or any work done by him in excess of his normal working hours, logically and legally, he has to pay the entire components of the actual wages minus only such components compensating the defrayal of the special expenses likely to be incurred by the concerned employee. Encashment of leave and payment for OT work, therefore, would require the same treatment. One may argue why then the difference in the definition of the same term in certain Enactments. It is only because of the nature of the benefit sought to be given under the Act rather than bringing in a uniform interpretation of the term. The exclusion would come into play only in respect of the computation of that particular benefit and not in respect of all others. The actual practice, if any, contrary to the above legal position, in spite of its ubiquitousness, would not pass legal scrutiny.
From India, Salem
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"Wages" is a comprehensive term including the entire package of compensation payable to an employee for the work done by him at the end of the predetermined wage period. Therefore, it would generally include the allowances given in the form of fringe benefits. Whenever the employer has the necessity to compensate the employee for any given period in lieu of his work or any work done by him in excess of his normal working hours, logically and legally, he has to pay the entire components of the actual wages minus only such components compensating the defrayal of the special expenses likely to be incurred by the concerned employee. Encashment of leave and payment for OT work, therefore, would require the same treatment. One may argue why then the difference in the definition of the same term in certain Enactments. It is only because of the nature of the benefit sought to be given under the Act rather than bringing in a uniform interpretation of the term. The exclusion would come into play only in respect of the computation of that particular benefit and not in respect of all others. The actual practice, if any, contrary to the above legal position, in spite of its ubiquitousness, would not pass legal scrutiny.
From India, Salem
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
EPFO Circular Leave Encashment.jpg