Dear All, Please help me to calculate the leave encashment , for example if some one has basic=Rs 4833 and Annual leave balance=19.
From India, New Delhi
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8From India, New Delhi
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Dear Ankita,
Based on the calculation provided, it should be Rs. 3532 (4833/26*19). However, I believe you have not provided complete information. Please note the following:
1. The encashment of leave should be paid on Basic + Allowances. You have only mentioned Basic. If any allowance/s are also included in the Gross Wages, all of them should be considered.
2. You have mentioned that you are from Delhi where the Basic (as per MW Act) is relatively high. Please take note of this point. If this is related to any other state, ensure that the Basic Wages comply with the Minimum Wages Act (under the appropriate government).
Seniors may provide additional insights or corrections if they feel it is necessary.
Thank you.
From India, Delhi
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Based on the calculation provided, it should be Rs. 3532 (4833/26*19). However, I believe you have not provided complete information. Please note the following:
1. The encashment of leave should be paid on Basic + Allowances. You have only mentioned Basic. If any allowance/s are also included in the Gross Wages, all of them should be considered.
2. You have mentioned that you are from Delhi where the Basic (as per MW Act) is relatively high. Please take note of this point. If this is related to any other state, ensure that the Basic Wages comply with the Minimum Wages Act (under the appropriate government).
Seniors may provide additional insights or corrections if they feel it is necessary.
Thank you.
From India, Delhi
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Dear Ankita & Pan Singh,
Please read the discussion that took place in this forum on the subject at this link: https://www.citehr.com/599968-annual...oss-basic.html.
There are a few points to be noted regarding the matter:
1. Leave encashment is not a right to be exercised by employees but an option. In fact, many employers do not have such a policy except on separation such as retirement, resignation, or death.
2. The basis for computation is the salary, i.e., 'the emoluments' that an employee would have drawn if they had availed a paid leave such as EL/PL, minus abnormal earnings like OT/holiday wages, incentives, conveyance, etc., which are linked to actual work, and any reimbursements.
3. Except for EL/PL, no other leave such as CL, Sick Leave, or unutilized Maternity leave, which are available for actual availing on the occurrence of such events, is encashable.
4. The number of days encashable is left to the discretion/policy of the employers as it varies from employer to employer. Many only allow up to 50% of the days at credit in the leave account. However, on retirement/superannuation, EL/PL in full, subject to the maximum stipulated, can be encashed.
5. Until the judgment of SC, the contribution on the encashed amount was being recovered/contributed to the EPF account of employees. However, the SC ruled in its judgment dated 12.3.2008 that there is no obligation on the employee/employer to make such a contribution on encashment (please see copies of relevant attached documents).
6. The amount of encashment will be treated as 'earnings' like salary and is subject to TDS.
7. If I am correct, the computation should be made on a 30-day basis instead of 26 days (except for the purpose of calculating gratuity, which has been stipulated as such). This is a general practice. However, no one can stop you if you would prefer to adopt a monthly salary/26 days instead of 30 days.
8. Some firms allow encashment linking it with LTA/LTC whenever employees avail LTA/LTC subject to eligibility.
9. As a regulatory measure, encashment is not allowed more than once in a year. However, in small firms, more than once is also permitted to help employees meet their commitments at their discretion.
It is advisable to create a 'Leave & Leave Encashment Policy' considering the various practices followed in your sector. This will enable you to regulate 'encashment' applications properly.
From India, Bangalore
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Please read the discussion that took place in this forum on the subject at this link: https://www.citehr.com/599968-annual...oss-basic.html.
There are a few points to be noted regarding the matter:
1. Leave encashment is not a right to be exercised by employees but an option. In fact, many employers do not have such a policy except on separation such as retirement, resignation, or death.
2. The basis for computation is the salary, i.e., 'the emoluments' that an employee would have drawn if they had availed a paid leave such as EL/PL, minus abnormal earnings like OT/holiday wages, incentives, conveyance, etc., which are linked to actual work, and any reimbursements.
3. Except for EL/PL, no other leave such as CL, Sick Leave, or unutilized Maternity leave, which are available for actual availing on the occurrence of such events, is encashable.
4. The number of days encashable is left to the discretion/policy of the employers as it varies from employer to employer. Many only allow up to 50% of the days at credit in the leave account. However, on retirement/superannuation, EL/PL in full, subject to the maximum stipulated, can be encashed.
5. Until the judgment of SC, the contribution on the encashed amount was being recovered/contributed to the EPF account of employees. However, the SC ruled in its judgment dated 12.3.2008 that there is no obligation on the employee/employer to make such a contribution on encashment (please see copies of relevant attached documents).
6. The amount of encashment will be treated as 'earnings' like salary and is subject to TDS.
7. If I am correct, the computation should be made on a 30-day basis instead of 26 days (except for the purpose of calculating gratuity, which has been stipulated as such). This is a general practice. However, no one can stop you if you would prefer to adopt a monthly salary/26 days instead of 30 days.
8. Some firms allow encashment linking it with LTA/LTC whenever employees avail LTA/LTC subject to eligibility.
9. As a regulatory measure, encashment is not allowed more than once in a year. However, in small firms, more than once is also permitted to help employees meet their commitments at their discretion.
It is advisable to create a 'Leave & Leave Encashment Policy' considering the various practices followed in your sector. This will enable you to regulate 'encashment' applications properly.
From India, Bangalore
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LEAVE ENCASHMENT NOT INCLUDED IN WAGES FOR P. F. CALCULATION.pdf
Leave Encashment & Salary Calculation.xls x