Leave encashment calculation
UMA ASHISH GUPTA
(Querist) 01 March 2014
This query is : Resolved
Dear All,
I have joined manufacturing industry for the first time. As per my good knowledge, it is calculated on the bases of Basic salary but my Company has a practice of calculating on gross salary.
Let me know, under factories Act & Gujarat Shop's and Establishment Act. how it is calculated? and what is the right practice?
Kumar Doab
(Expert) 01 March 2014
Encashment of E L is made at the time of full & final settlement. If any employee takes leave during service period then he is paid salary on his full earnings & not on basic therefore practice of your company of encashment @ Gross seems to be correct.
Leave is also settled as per bilateral agreement between employees and employer, therefore standing orders and negotiated leave policy (that should offer superior benefits) may also be looked into.
Or For the leave and its encashment you may go thru the enactments that is applicable to the establishment e.g; Factories Act 1948, SHOPS AND Commercial ESTABLISHMENTS ACT, SMALL ENTERPRISES (EMPLOYMENT RELATIONS) ACT 2002.
>>> Factories Act 1948: Chapter VIII: Section 79: wages in lieu of the quantum of leave to which he was entitled immediately before the discharge, dismissal, quitting of employment, superannuating or death calculated at the rates specified in sub-section (1)
As per Factories Act Annual Leave Encashment Calculation ought to be done on the basis of Monthly Pay Drawn by the employee during the Preceding Month and should be divided by 26 not 30.
>>> State of Gujarat followed Bombay SHOPS AND COMMERCIAL ESTABLISHMENTS ACT.
The copy of GUJARAT SHOPS AND ESTABLISHMENTS ACT structured with the effect effects of notifications should be available at the website of Dept. of Labor Gujarat or you may buy from market.
GUJARAT SHOPS AND ESTABLISHMENTS ACT, 1948
Section 35 - Leave
3[(1A) Every employee who has accumulated leave shall, when he goes on leave for a period of not less than twenty-one days, be entitled to surrender, out of the balance of leave remaining to his credit on the commencement of his leave, any period of leave, not exceeding twenty-one days; and such employee shall, for the period of leave so surrendered by him, be lentitled to payment of wages
Section 36 - Pay during leave
________________________________________
Every employee shall be paid for the period of his leave at a rate equivalent to the daily average of his wages, for the days on which he actually worked during the preceding three months, exclusive of any earnings in respect of overtime.
>>> SMALL ENTERPRISES (EMPLOYMENT RELATIONS) ACT 2002:
2. Definitions: (n) Wage: Wage means the basic wage, dearness allowance, city compensatory allowance or house rent allowance or overtime wages or wages for leave period or bonus.
CHAPTER: IV: CONDITIONS OF WORK: 11. (4) Annual Leave & Holidays
Rajendra K Goyal
(Expert) 01 March 2014
Well advised by the expert Kumar Doab ji, agree to it.
UMA ASHISH GUPTA
(Querist) 03 March 2014
Plenty thanks Sir(Kumar Doab)for solving my query.
Thanks Mr. Rajandra Goyal for your response.
