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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
Turn an unused earned-leave balance into a rupee amount, using the wage and the day-rate divisor your leave policy specifies.
Leave encashment pays an employee for earned leave they have not taken, either at exit or, where the policy allows, during service. The arithmetic is a daily wage multiplied by the days encashed.
What differs between employers is the wage the day rate is built on (basic and DA, or gross) and whether the month is divided by 26 or 30. This leave encashment calculator lets you set both so the result matches your own policy.
Enter your figures, then press Calculate
Your 3 inputs become a full breakdown, with every step of the working shown beneath the headline figures.
A per-day wage, multiplied by the days being encashed. The only real decision is the divisor that turns a monthly wage into a daily one, and that is set by your leave policy.
Leave encashment = (Monthly wage ÷ Divisor) × Leave days encashed, where the divisor is 26 or 30 as your policy states
Leave policies usually encash on basic plus dearness allowance, and some on gross. Use the component your policy names, as at the date of encashment.
Divide by 30 for a calendar-month day rate, or by 26 where the policy treats weekly offs as unpaid days for this purpose. The 26-day figure is higher per day.
Only the balance your policy allows to be encashed. Many policies cap the days that can be carried forward or encashed in a year.
What this does not include
Asked often enough about this calculation to be worth answering beside it.
Use the divisor your leave policy or appointment letter states. Dividing by 30 spreads the monthly wage across every calendar day. Dividing by 26 spreads it across working days only, so each day is worth more. Apply the same choice to everyone covered by the policy.
It depends on the policy. Many employers encash on basic plus DA; some use gross. The wage you enter here should be the one your policy names, as at the date of encashment.
Usually only earned or privilege leave is encashable. Sick and casual leave typically lapse at year end, but the policy decides, subject to the state law that applies.
Encashment during service is taxed as salary. Encashment at retirement or resignation may be partly exempt under s.10(10AA) of the Income-tax Act, within a notified limit. Check the current limit before computing tax.
Yes, where the policy allows unused leave to be encashed at exit it is one of the earnings lines in the settlement, alongside salary for days worked and, where eligible, gratuity.
A calculator applies a rule to figures you type in. A payroll run applies it to your actual employee record, your locations and your verified declarations, which is where Professional Tax, LWF and TDS also resolve.
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