Leave encashment calculator · OSH Code · 30-day carry-forward cap
Leave encashment calculator, law and policy apart.
Enter the pay, the days and the divisor. The calculator works out the amount with each step shown, compares Basic + DA, Code wages and gross, and says what the OSH Code requires for this person at this moment, and what is left to your policy.
because the law says when encashment is owed, and the policy says how much a day is worth.
The short answer
Divide the monthly pay your leave policy names by the divisor it names, then multiply by the days. Paiteq's sample: Code wages of ₹12,000 ÷ 30 calendar days × 6 days = ₹2,400. The law decides when encashment is owed. For the workers the OSH Code covers, that is all unused annual leave on exit, and the days above 30 at the year end, on the worker's demand. The base and the divisor are policy, so write them down before anyone leaves; for a worker, Code wages ÷ 26 is the safe default.
Key facts
- Leave encashment = monthly base ÷ divisor × days; the base and the divisor come from the leave policy or the appointment letter.
- For workers the OSH Code covers, all annual leave to their credit is encashed at separation, with no maximum number of days (in force from 21 Nov 2025).
- They carry forward up to 30 days; days above 30 are encashed on the worker's demand at the end of the calendar year, and are never lapsed.
- Managers, and supervisors earning over ₹18,000 a month, are outside the Code's leave rules: their contract and policy decide.
Days of leave, worked out
Leave encashment₹2,400
- 01Monthly base: Code wages
- ₹12,000.00
because Basic + DA and allowances that are not excluded, with excluded items within half of total remuneration, so nothing is added back
- 02Divisor
- 30 days
because the policy uses the calendar days of the month, and September 2026 has 30
- 03Per day
- ₹400.00
because ₹12,000.00 ÷ 30
- 04Days encashed
- 6 days
because the unused annual leave in the balance on the last working day
- 05Leave encashment
- ₹2,400
because ₹400.00 × 6 days, rounded once to the rupee
The same days on each base
- Basic + DA₹1,800
- Code wages₹2,400
- Gross pay₹3,600
The lawAt separation, a worker is entitled to encash all annual leave to their credit, with no maximum number of days.
Your policyThe base and the divisor are the policy's, written down before anyone leaves; most employers pay it in the F&F.
Income taxPartly exempt on leaving a private employer: the least of the amount, ₹25,00,000 across all employers in a lifetime, and limits worked on average salary over the last ten months. Your CA confirms the exempt part before the F&F's TDS is worked.
Not legal advice. The calculator covers annual or earned leave in a private establishment. It does not work out income tax, state Shops and Establishments rules on encashment, or the leave rules for central and state government employees.
What each input means
- The moment
- On exit, every day in the balance; at the year end, only the days above the carry-forward cap; during service, whatever the policy allows.
- The person
- A worker is anyone the OSH Code covers: not a manager, and a supervisor only up to ₹18,000 a month. Salary alone does not take someone out: a developer, accountant or sales executive on ₹1 lakh who manages no one is a worker. Team leads and supervisors above ₹18,000 are not. Choosing a worker sets the base to Code wages and the divisor to 26. Choose the other option for managers; the result is then policy only, and your state's Shops and Establishments law may still cover them.
- Your policy pays on
- The monthly figure the leave policy or appointment letter names. With salary components, all three are worked out and compared.
- Code wages
- Basic, DA, retaining allowance and allowances that are not excluded, plus excluded items above half of total remuneration. Leave out overtime and one-off payments.
- Divisor
- 26 treats a month as its working days and gives the highest daily rate, so it is the safe default for a worker; 30 is the same every month; calendar days change with the month, so February pays the most per day.
Official sources
- Additional FAQs on Labour Codes (as on 16.03.2026), replies 20, 22 and 26: who is entitled, and when leave is encashedofficial
- Occupational Safety, Health and Working Conditions Code, 2020, s.32: annual leave with wagesofficial
- Code on Wages, 2019, s.17(2): wages on exit within 2 working daysofficial
- Code on Wages, 2019, s.2(y): wages and the 50% add-backofficial
- Income Tax Department: taxability of retirement benefits, leave encashmentofficial
Each link opens the Ministry of Labour & Employment document · checked by the LekhaHR team, reviewed 6 Oct 2026
No. 01
How to calculate it
How do I calculate my leave encashment?
A leave encashment calculation has three inputs: the monthly pay your leave policy names, its divisor and the days. Divide the pay by the divisor and multiply by the days. Then check the law: for the workers the OSH Code covers, it decides that all unused annual leave is paid on exit, and what is paid at the year end.
Worked example: Sanjay Mishra's F&F at Paiteq, 6 days
- Pick the base the policy names. Paiteq's sample policy pays encashment on Code wages. Sanjay's Basic is ₹9,000 and special allowance ₹3,000; HRA ₹4,500, conveyance ₹1,500 and the employer's PF of ₹1,440 stay under half of total remuneration, so nothing is added back. Code wages: ₹12,000 a month.
- Pick the divisor. The policy divides by the calendar days of the month, and September 2026 has 30.
- Work out a day. ₹12,000 ÷ 30 = ₹400.00.
- Count the days. 6 days of earned leave were left in his balance on his last working day, Fri 25 Sep 2026.
- Multiply and round once. ₹400.00 × 6 = ₹2,400, paid in his F&F with the final wages, due within 2 working days.
| Base | A month | 6 days |
|---|---|---|
| Basic + DAspecial allowance and HRA left out | ₹9,000 | ₹1,800 |
| Code wagesBasic + special allowance; nothing added back | ₹12,000 | ₹2,400 |
| Gross payHRA and conveyance in too | ₹18,000 | ₹3,600 |
Design preview · sample data · Paiteq Technologies
The calculator opens on this example. Change the base or the divisor to see the figure move. Sanjay's whole F&F, line by line
No. 02
The formula
What is the formula to calculate leave encashment?
Leave encashment = monthly base ÷ divisor × days of leave, rounded once to the rupee. Three divisors are in common use, and each gives a different day's pay from the same salary.
| Divisor | A day | 6 days |
|---|---|---|
| 26 working days (26) | ₹461.54 | ₹2,769 |
| 30 days (30) | ₹400.00 | ₹2,400 |
| Calendar days, October 2026 (31) | ₹387.10 | ₹2,323 |
| Calendar days, February 2027 (28) | ₹428.57 | ₹2,571 |
Gratuity is the one exit figure where the divisor is fixed by law, at 26. Work out gratuity on the 15/26 formula
No. 03
The rules behind it
What is the new rule for leave encashment?
The OSH Code, in force from 21 Nov 2025, sets annual leave and its encashment for workers in establishments with 10 or more of them. They carry forward up to 30 days, the days above 30 are encashed on the worker's demand at the year end and never lapsed, and everything to their credit is encashed when they leave. Each rule below carries its date and source.
- 01Who the rules cover
- workers; supervisors to ₹18,000
because the Code's leave provisions apply to workers, sales promotion employees and working journalists included, and to supervisors only up to ₹18,000 a month; managers are outside them.
Effective 21 Nov 2025 · OSH Code, 2020, s.2(1)(zs) · checked by the LekhaHR team 30 Sep 2026
- 02Who earns annual leave
- 180 days worked in a year
because annual leave with wages starts once a worker has worked 180 days or more in a calendar year.
Effective 21 Nov 2025 · OSH Code, 2020, s.32 · checked by the LekhaHR team 30 Sep 2026
- 03How fast it accrues
- 1 day per 20 worked
because an adult earns 1 day for every 20 days worked in the previous calendar year, so at least 9 days for someone who just qualifies.
Effective 21 Nov 2025 · OSH Code, 2020, s.32 · checked by the LekhaHR team 30 Sep 2026
- 04Carry forward
- up to 30 days
because unused annual leave carries into the next calendar year up to 30 days, and the days above it are paid, never lapsed.
Effective 21 Nov 2025 · OSH Code, 2020, s.32 · checked by the LekhaHR team 30 Sep 2026
- 05Year end
- above 30 days, on demand
because the days above the 30-day carry-forward are encashed on the worker's demand at the end of the calendar year; the Ministry's FAQs (reply 26) also cover leave applied for and refused. A higher cap is allowed, never a lower one.
- 06On exit
- all leave to credit
because at separation a worker is entitled to encash the leave to their credit, and the Code sets no maximum number of days.
- 07When it is paid on exit
- safest: with the final wages, within 2 working days
because wages due on an exit are paid within 2 working days; whether exit encashment counts as wages for that clock is unsettled, so paying it in the same statement is the safe course.
Effective 21 Nov 2025 · Code on Wages, 2019, s.17(2) · checked by the LekhaHR team 30 Sep 2026
What the law decides, and what your policy decides
| Question | The law (workers the OSH Code covers) | Your policy |
|---|---|---|
| Who is owed encashment | Workers the OSH Code covers, on exit and above the cap at year end | Everyone else, and any encashment during service |
| How many days | All leave on exit; above 30 at year end | A higher cap, a minimum balance to keep, a yearly limit |
| Monthly base | Wages in lieu of leave; Code wages is the safe reading | Basic + DA, Code wages or gross; for a worker, Code wages |
| Divisor | Not fixed; 26 gives a worker the most per day and is the safest default | 26, 30 or the calendar days of the month |
| Income tax | In service: taxed in full. On leaving a private employer: exempt up to ₹25,00,000 lifetime, and limits on average salary | Your CA confirms the exempt part |
On exit and at the year end, side by side
| Question | On exit | At the year end |
|---|---|---|
| Who triggers it | Automatic: the exit itself | The worker's demand |
| Which days | Every day in the balance | Only the days above the 30-day carry-forward |
| When it is paid | In the F&F, with the final wages, within 2 working days | In the December payroll, or the first one after the demand |
Some states' Shops and Establishments laws allow a larger accumulation than 30 days; where a state law is more favourable to the worker, it applies (Ministry FAQs, 16 Mar 2026, reply 25).
At the year end only the days above the cap are in play. Paiteq's Asha Rao is on course for 18 days of earned leave on 31 Dec 2026, under the 30-day cap, so nothing is encashed and all of it carries forward. Leave rules under the OSH Code, with carry forward
Design preview · sample data · Paiteq Technologies
No. 04
What changes in LekhaHR
How does payroll software settle leave encashment?
In LekhaHR the leave policy holds the base, the divisor and the carry-forward cap, set once. The leave balance is a ledger of credits and days taken, so on the last working day the F&F statement reads the days left, works out the encashment with its because line, and puts it beside the final wages.
- 01Leave policy
- base, divisor, cap
because the three choices are written once and used for every exit and year end.
- 02Leave balance
- a ledger, not a number
because every credit and every day taken is a line, so the closing balance can be checked.
- 03F&F statement
- encashment with its working
because it is paid with the final wages, within 2 working days.
Leave is set up from the first day in onboarding, where each new hire's leave policy is assigned, and the exit is settled in LekhaHR payroll, with the F&F on one statement. Full and final settlement, step by step
No. 05
Questions
Leave encashment questions, answered with the numbers.
How is leave encashment calculated?
Find the monthly pay your leave policy uses, divide it by the policy's divisor (26, 30 or the month's calendar days) and multiply by the days being encashed. On Code wages of ₹12,000 with a divisor of 30, 6 days come to ₹2,400. If the policy is silent, settle a worker's encashment on Code wages ÷ 26: it is the reading least likely to be challenged, and a later, clearer policy can only be compared against it.
What is the formula to calculate leave encashment?
Leave encashment = monthly base ÷ divisor × days of leave. The base is Basic + DA, Code wages or gross pay, and the divisor is 26, 30 or the calendar days of the month, both as the policy sets. Round once, at the end, to the rupee.
What is the new leave encashment rule?
From 21 Nov 2025, under the OSH Code, a worker carries forward up to 30 days of annual leave. Days above 30 are encashed on the worker's demand at the end of the calendar year and are never lapsed, and all leave to the worker's credit is encashed at separation, with no maximum number of days. Annual leave starts after 180 days worked in a year, at 1 day for every 20.
Is leave encashment calculated on basic or gross salary?
For a worker the OSH Code covers, encashment is wages in lieu of leave, so Code wages is the safe reading; a Basic-only base is the figure most likely to be challenged. For managers, whichever the policy names. Basic + DA gives the lowest figure, gross the highest, and Code wages sit between. For Paiteq's sample of 6 days, that is ₹1,800, ₹2,400 or ₹3,600. Write the base into the policy so every exit is settled the same way.
Should leave encashment be divided by 26 or 30?
Either, if the policy says so; for a worker the OSH Code covers, 26 is the safest default. Dividing by 26 counts only working days and pays more per day; 30 pays the same every month; calendar days pay most in February. On ₹12,000 for 6 days: ₹2,769 on 26, ₹2,400 on 30.
Is there a limit on how many days of leave can be encashed?
Not under the OSH Code, for the workers it covers: at separation all leave to their credit is encashed. A policy can limit encashment during service, and it governs managers and senior supervisors, whom the Code's leave rules do not cover.
What is the 300 days leave encashment rule?
It is a limit for government employees under their own leave rules, not an OSH Code limit for private employers. The OSH Code sets no maximum number of days that a worker can encash on exit, and the days above the 30-day carry-forward are encashed at the year end, so nothing is lost to a 300-day ceiling. A private employer's policy may set a limit for managers, whom the Code's leave rules do not cover.
Can leave be refused during the notice period?
A policy can restrict leave during notice, but days it refuses still go into the F&F. Setting leave off against a notice shortfall needs the employee's written request; done silently it is the most common F&F complaint. Credit the final month's accrual pro rata to the last working day.
What if someone leaves with a negative leave balance?
Recover it as loss of pay in the final wages, at the same base and divisor the policy uses for encashment. Using a different divisor to recover than to pay is the inconsistency employees notice.
Do managers get leave encashment under the OSH Code?
No. The Code's leave and encashment rules cover workers, and supervisors only up to ₹18,000 a month. Managers and better-paid supervisors get encashment if their appointment letter or the leave policy gives it, and your state's Shops and Establishments law may add rules.
How much leave encashment is tax free?
Encashment while in service is taxed as salary in full. Encashment when someone leaves a private employer is partly exempt, up to a lifetime limit of ₹25,00,000 across all employers (from 1 Apr 2023) and a formula on average salary over the last ten months; government employees' retirement encashment is fully exempt. Your CA confirms the exempt part before the F&F's TDS is worked.
For employersLekhaHR is HR and payroll software for small Indian teams. See leave management →