Method for encashment of annual leaves

[S.C. WADHWA]

Dear expert,

Please advise us the right method of encashment of accommulated leaves to be paid to an out going employee. On which salary leaves are to be paid. Please also quote if there is any case law regarding encashment of leaves.

Regards,

WADHWA

 

 

[SHIVKUMAR SHARMA]

Dear Mr.Wadhwa

Leave encashment can be Calculated as under:

BASIC SALARY + DA x 12(NUMBER OF MONTH OF  IN THE YEAR) x NUMBER OF DAYS OF LEAVE TO BE ENCASH

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           365( NUMBER OF DAYS OF THE YEAR)

AI Summary

Leave encashment: calculate pay using basic salary plus dearness allowance pro rata for accumulated leave days.
Encashment of accumulated annual leave should be calculated on the basis of Basic Salary plus Dearness Allowance. Practical computation: annualize Basic+DA, multiply by the number of accumulated leave days, and divide by the total days in the year. The response provides this formula as guidance and does not cite any case law or statutory authority.