Earned leave calculation is made on the Basic pay of the respective employee and so may vary from individual to individual of the company. Section 79 of Factories Act 1948 is the standard referred and followed by all the companies of India, unless they have their leave policy which is better than that proposed in the act.
Earned leave calculation formula includes and depends on the basic pay of the employee and the number of years that the employee has been with the company. Usually an employee is considered as eligible for earned leaves the current year if he / she has worked for a period of 240 days the year before. Carry forward of leaves varies among companies that some companies wont allow any carry forward of leaves while some others have restricted amount of leaves forward unlike those who facilitate employees with the full carry forward of all leaves.
Find below the formula for calculation of earned leave.
Basic * 15 / 26 x No. of years worked
Whereas some companies use a different version of the formula, that is similar to the above one but with a little modification made and is as below:
EL = no. of EL balance/260 days (working days in a year) x Gross salary or CTC (annual)
While some other companies divide balance leaves from previous year by full year.
In simple words to speak, earned leaves are the leaves earned by the employee for the services offered. Usually earned leaves in most companies are given at 1.25 days per every month. Leave encashment depends on the last pay drawn by the employee that includes basic pay, dearness allowance, non-practicing allowance for doctors, personal pay, if any, deputation allowance in respect of employees of the company on deputation, allowance admissible to EDP etc.
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