To calculate leave salary, you can use the formula:
- Leave encashment: [(Average Basic salary + Average Dearness Allowance) / 30]
- No. of Earned Leaves
Here's what the variables in the formula mean:
- Average Basic salary: The average monthly basic salary
- Average Dearness Allowance: The average monthly dearness allowance (DA)
- No. of Earned Leaves: The total number of leaves accumulated
The formula considers the employee's per day salary, which includes their basic salary and dearness allowance. The amount is then divided by 30, and multiplied by the number of leaves the employee has accumulated.
If an employee's employment is terminated, they can either encash or clear their annual leave. The unused leave should be calculated at the gross rate of pay based on their last drawn salary