Leave Encashment Rules

Leave Encashment Rules

Every salaried person as per labor law is entitled to a minimum number of paid leave every year. However, it is not necessary that an individual employee utilities all the leave he is entitled for a year. In fact, most employers allow the employees an option of carrying forward such unutilised paid leaves. This would invariably leave the employee with an accumulated unutilised leave balance at the time of retirement or resignation from the company as the case may be. This compels the employer to compensate the unutilised paid leave of the employees. This concept is better known as leave encashment.

Any leave encashed during service is fully taxable and forms part of ‘income from Salary. However, a relief under Section 89 can be claimed.

Roles

Leave Configuration » Leave Policy Configuration

Inputs Needed

• Leave Type must be created.
• Post Type and Leave Applicability should be defined.

Functionality

The following can be configured:

• Which leaves can be encashed ? For Eg : Certain organizations allow the employees balance casual leaves for encashment while others allow balance medical leaves for encashment at the end of calendar year.
• How many time can the leave be encashed ? For Eg: For a given calendar year, CL can be encashed only once.
• How many maximum leaves can be encashed ? For Eg: Not more than 10 casual leaves can be applied for leave encashment.
• How much minimum balance should be maintained ? For Eg: If an employee has 20 Medical Leaves available and the minimum balance to be maintained after encashment is 5, then the employee can apply for leave encashement for only 15 leaves and NOT for all 20 available leave balance in his account.
• Twice in an service time of an employee leave encashment can be done.
• Employee can encash EL twice in his service time, once in between and once at the time of separation.

IN ALL CALCULATION Leave on LOSS of Pay (LOP) will extend the leave cycle accordingly.

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