Leave Encashment

Modified on Mon, 10 Jul, 2023 at 10:08 AM

Leave Encashment, substituting leave with pay, is  based on MOM’s in-depth guideline on the monthly base pay and gross pay per day.

 

With regards to an employee’s monthly pay, the leave encashment formula is based on the average work days for that particular month. To calculate the leave encashment formula:

 

           12 × monthly gross rate of pay
----------------------------------------------------------------- X number of balance leave days
52 Weeks × average number of workdays in a week

 

As an example, an employee has a 5-day work week and earns $2,000 per month.

  • The gross rate of pay is calculated as $2,000 x 12 months = $24,000

  • With 52 weeks in a year, his total working days is calculated as 5 Days x 52 weeks = 260 days.

 

From the above, calculating the gross pay per day would simply be Total Pay / Total Working Days; in this case $24,000 / 260 Days = $92.30.

 

From here, simply multiply the number of balance leave days the employee has to calculate his total leave encashment. For example, if the staff has 5 days of leave left, Gross Pay Per Day X Balance Leave Days: $92.30 x 5 = $461.50.

 

12 x Monthly Gross rate of Pay

52 Weeks x Average number of workdays in a week

Number of balance leave days

Leave Encashment ($)

$24,000

260 Days

5

$24,000/260 x 5 Days = $461.50

 

Accurate as of January 2023 - Please refer to MOM site for new updates, if any.

Was this article helpful?

That’s Great!

Thank you for your feedback

Sorry! We couldn't be helpful

Thank you for your feedback

Let us know how can we improve this article!

Select at least one of the reasons
CAPTCHA verification is required.

Feedback sent

We appreciate your effort and will try to fix the article