Leave encashment refers to the practice of converting accrued, unused leave or vacation days into monetary compensation.
Instead of taking the leave, employees have the option to receive a cash equivalent for the untaken leave days.
Leave encashment is a benefit provided by some employers and is often subject to company policies, employment contracts, and applicable labour laws. Leave encashment are usually a part of an organisation’s annual or periodic procedures, where employees are given the opportunity to encash unused leave days during a specific window.
FAQ
Leave encashment typically works by calculating the monetary value of the accrued leave days based on the employee's salary or wage rate. This amount is then paid to the employee either as part of their regular salary or in a separate payment.
Generally, only certain types of leave, such as annual leave or vacation leave, can be encashed. Other types of leave, such as sick leave or maternity/paternity leave, may not be eligible for encashment depending on the company's policies and local regulations.
Yes, there can be tax implications associated with leave encashment. In many jurisdictions, leave encashment is considered taxable income and may be subject to income tax and other deductions.
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