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Pvt_RajKing (Private)     22 November 2014

Earned leave encashment - formula in ap

To Service Law experts:

In hyderabad, some companies are calculating the Earned Leave Enncashment as: (BASIC SALARY/26) * EL Days. Where BASIC SALARY is per month it is normally @30% of total salary in most private companies. EL Days are Earned Leave and are working days equivalent.

But I have gone thru the section 30 and 2(23) of AP Shops and Establishments Act

https://www.vsez.gov.in/app_doc/APGOS/ANDHRA%20PRADESH%20SHOPS%20AND%20ESTABLISHMENTS%20ACT1988.doc

From that it is clear that it should be = (full salary per month/avg working days per month) * EL Days. Our average working days per month is 22, as we work 5 days a week.

It seems like the company took some lawyer's opinion and that lawyer seems to have told that I am wrong and that if the gratuity is calculated using BASIC and the number working days per month for gratuity is used as 26 per month then what the company does is correct and legal [i.e (BASIC SALARY/26) * EL Days.] 

Can someone tell me if I am reading the above sections wrong? I am a professional working in technology field & the company is a private company/US subsidiary)

Your considered thought and view on this matter is much appreciated.

Thanks



Learning

 1 Replies

Kumar Doab (FIN)     22 November 2014

The lawyer of the company is neither lawmaker not law enforcement agency or any authority. Your establishment should be covered by Andhra Pradesh Shops and Commercial Establishment Act..... and the no. of EL/annul leave rate of leave encashment can not be inferior to the provisions in the Act....of course company can provide superior benefits. The daily average wages are calculated as: Monthly Wages/26 To calculate The hourly wages decide further by 8. Multiply accordingly with no. of days....of EL.EL can be accumulated as per provisions in the Act. The Inspector appointed under this Act is the authority to decide.

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