How to calculate leave encashment?

Posted on 19th Jul 2018 | 33847 views

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Leave encashment calculation:

Leave encashment calculation is as follows for earned leaves there is no fixed rule as how much leaves can be carried forward every year or how many leaves can be encased. Most of establishments have their own rules. Usually the basic salary and dearness allowance is taken in consideration for calculation of the amount. Companies have their own policies for leave encashment in some of establishments leave encashment might not be available. So even if you an HR then better you decide yourself If you want to know examples for calculation then some companies encase pending leaves by paying the 50% comparing to a working day salary as well as few companies encash leaves only if the 50 % of allowed leaves are pending. The earned leave calculation is regulated as Factories Act 1948 and it’s State Rules OR if any organization wants to give more benefit to its employee than it would be calculated and paid as per organizational policy.

Leave encashment formula

Leave encashment formula:

Leave encashment formula Earned leave encashment calculation formula as per factories act

(Basic +DA)/26 * No of encashment days)

26 means working days of the month

Leave encashment calculator

Calculation of EL on the basis on the salary eligible for the EL (Basic+ DA+ HRA)

salary eligible for the EL (Basic+ DA+ HRA) / 26 * no. of EL payable

Different companies calculate it in different way. Most used ways are as follows

1) 1 day basic salary X no. of ELs

2) (1 day basic salary + 1 day TA + 1 day DA) X no. of Els

Leave encashment calculation formula


A person gets a salary of Rs.12000 per month and allowed leave days per month is 2. Calculate Leave Encashment Payment.

Employee salary = Rs.12000 Leave Days Per month = 2

Substitute the values in the formula,

Annual leave encashment = (leave days x 12) x (Gross Salary x 12 / 365)

= (2 x 12) x (12000 x 12 / 365)

= Rs. 9468.493

Or use (Basic+DA) / 26* No of Earned leaves

1 Comments on How to calculate leave encashment?

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Umesh Kene
178 days ago

Under section 80 of factories act, gross wages excluding bonus and overtime to be considered for leave encashment. Please check & confirm.


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