How to Calculate Encashment of Leave Preparatory to Retirement?

When an employee is retired from Govt service on the basis of Encashment, the encashment of leave is due for the said employee. This encashment is granted to the employee on the leaves in his/her credit not exceeding to 365 days according to new rules of encashment of 2012. The greater the number of leaves in his/her credit the more encashment he/she will get.

An employee can avail encashment after the minimum service of 30 years or the employees can avail encashment at the age of 60 years. The pay is calculated that he/she was being drawn during the period of last days i.e if an employee has 200 days leave in his/her credit then the pay of last 200 days is calculated for the encashment purpose. The formula for the purpose of calculating encashment of leave is as under:

Basic Pay x 5.918 x Leaves in credit/180

Note this formula is before the revision of leave encashment from 180 to 365 days. New formula will soon be replaced.

How to Calculate Leave Encashment manually

I will illustrate you with example that how to calculate the leave encashment manually. Suppose a person has 60 days leave in his/her credit at the time of retirement. He/she retired on 08/01/2013 with basic pay Rs. 15000 while his/her pay was 13000/- before 1st December 2012. We will go back 60 days from 08-01-2013 in this way and will make the calculation of encashment in this way:-

Period Days Pay Amount
January 2013 08 Days 15000/- 3871/-
December 2013 31 Days 15000/- 15000/-
November 2013 21 Days 13000/- 9100/-
Total 60 Days 27971/-

 

 

Don’t Miss: Notification of Encashment of Leave 2012

 

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27 Responses to “How to Calculate Encashment of Leave Preparatory to Retirement?”

  1. ashfaque alam says:

    Dear Shumaila:
    I am dealing employees pension, commutation and LPR and other related payments in EOBI. I need clarification about the revised working of LPR on the basis of 365 days. previously we were applying the method provided by AGPR vide notification No. 204/Reg.I/13/85/KW dated 25-05-1999. As the Government has amended in the gazzete by replacing 180 days with 365 days, please give me the method of calculation of LPR. For your convenience, the method mentioned in the above mentioned notification is as under:

    LPR amount = 6 months x No. of entitled days x total pay / 180 days

    I shall be very grateful to you if you reply me soon in either my email addresses as following:
    1. aas.eobi@gmail.com
    2. ashfaque.alam@eobi.gov.pk Thanks and regards

    • Dear Asfaque Alam, now the formula for the calculation of Leave Encashment has been published with this post. Thanks
      This amount is given on Leave Encashment not LPR.

  2. reiba haider says:

    salams will you plz tell me that that while calculating the total days of leave on your credit you count it from the start till the date of your retirement or you exclude the leave of last one year before the date of retirement e.g if the date of retirement is 2-1-2012 the earned leave of 2011 will be counted or not

    • Dear Reiba, According to mine information last year leaves are not counted but i have heard that many employees als got the same leaves in their credit.

  3. Abdul Salam says:

    Dear Sister,

    My father is going to retire in next month. I have read your uploads. Can you tell me about the manual formula you have worked out for calculating LPR.

    My another question is that Adhoc Allowances 2010,2011,2012 contain admissibility of these allowances in calculating the LPR. I need your discussion on this issue.

  4. Asim says:

    Dear Sister,

    One important question to ask from you, as per procedure govt servant has to apply at least 03 x months in advance for encashment, my question to what month the leave credit will be given to him as he will not get the 04 x leaves for last 03 x months as he has to apply advance in 03 x months, it is very important, our lot of employees are suffering due to this lack of information. Need your kind guidance, please. If you have any confusion, feel free to contact me sister.

    My regards.

    • Dear Aasim, during the period of Leave Encashment no Earned Leave is allowed, however an employee can avail Causal Leave.

      • Asim says:

        Many thanks dear sister for your prompt response as ever but my question was not that I want to ask as per rules a government servant has to apply 2-3 month in advance for availing encashment the concerned Admin section issues then his daily order and give him credit of leave (LFP) until that time i.e. they do not calculate 2-3 months remaining credit which also falls before the commencement of encashment for example a man is due to retire on 14-4-2014, he applies for encashment on 14-01-2013, he leave credit on that date comes to 348 days but what will happen to his credit of 02-13 & 03-13 (02 months x 08 days leave) so to make his leave credit as 356 instead of 348, kindly guide me about the rule position, it is very important, I think now you got my point very well.

        My regards

        • Dear Asim, whenever an employee applies for leave he leave account is finalized and on the basis of this leave account the final notification of leave encashment is issued. The remaining period is not counted as the notification is already issued. I have also come to know that the leaves of the period of leave encashment are not counted in leave encashment. i. e when ever the leave encashment of an employee starts wef 01-01-2012 and the employee is to retire from 01-01-2013, leaves prior to 01-01-2012 are counted and the leaves counted after 01-01-2012 are illegal. This I have heard from many people but it is not with the proof of any notification. Thnaks

          • Asim says:

            Dear Sister

            Once again thanks a lot for your prompt response, however, I am sorry to say that my query is still not fully met, I once again repeat that as per existing rules a government servant apply for encashment advance in 02 x 03 months before its commencement for example if a govt servant is to proceed on encashment w.e.f. 13-4-2013, he will apply for encashment on 13-01-2013. My question is when he apply for encashment on 13-01-2013, he has leave at his credit as (348) days, whereas for the remaining 02 months that is Feb & April' 2013, whether the credit of these two months will be given to government servant as this period also falls before commencement of encashment or otherwise, need your kind help as ever.

            My sincere regards and Juma Mubarak.

          • Asim says:

            Sorry sister I have written for the month as Feb & April, it is Feb & March.

  5. munir alam says:

    where can i find the rules about encashment after completing 30 years of service, when should he or she apply for encashment, how much time before..?? I need full details please, thank you

  6. sajid says:

    Thank you for prompt reply, I just want to know that in compliance of which leave rule such formula (factor 5.918) has been developed? Plz let me know the excat rule position in support of such factor or we may not support such practice if it is not baced by rules. Plz let me know also some cell numbers or office numbers of accounts officers so that i may be able to contact them in order to update my little knowledge.
    I hope you may cooperate in this regard

    with best wishes
    sajid

    • Dear just tell me wt is the wrong calculation if we use the factor 5.918.

      • sajid says:

        I just want to know about its conception and rule position or under which O.M or notification MOF has issued this factor to calculate the amount of leave encashment.
        sajid

    • Dear I have solved the problem and the answer of your question
      Months in 365 days =12 Months
      Months in 1 Day =12/365
      Months in 180 Days =(12/365) x 180
      = 5.9178
      = 5.918
      Hurrah

      • sajid says:

        that's great, thank you for your devoted attention, nevertheless, amount of encashment of LPR would be calcualted on the last pay drawn multiplied by your factor i.e. 5.918 (assumed only maximum of 180 days leave is encahsed prior to issuanc of new notification.
        with best wishes
        sajid

  7. sajid says:

    AOA, I would like to ask the leave encashment formula for review. plz let me know about factor 5.918 how did u derive it? we in our office used to calculate the amount of encashment of leave as B.pay X12 X leave at his credit/365 days.
    Plz reply my query
    thanks
    sajid

    • Dear this formula is got from a Account Officer. I ll try to find from where he got it. However hundreds employee have claimed leave encashment by this formula.

      • sajid says:

        Thanks for reply, I would request you plz recheck the same formula, it is not the correct as rules say.However I am waiting for your prompt reply.I understand that calculation of encashment of LPR by above formula may lead to audit observation, which may create complicaitons for the employees at latter stage.
        I would also request that plz go through the leave rules, 15,17, and 19 once again and correct interpertation may be uploaded
        with best regards

        sajid

        • Dear I have checked the same formula. Actually it was before the revised Notification of Leave Encashment 2012 when 180 Days leave were maximum for leave encashment. I tried to replace 180 days with 365 that resulted in wrong. So for the facility of the visitors I have added a manually formula for calculation of leave encashment that is 100% accurate without any audit objection.

          • sajid says:

            Again we are going to make mistake, in my knowledge no such formula has been in practice actually at any DAO before the revised notification issued by the GOP w.e.f 01-07-2012. Dear madam plz check it carefully and let us know the actual picture.
            The factor i.e. 5.918 you calculated did not make any sense, I have revisit the whole leave rules (revised 1981) and could not found such factor i.e.5.918 to calculate leave encashment payment. This is so simple that the amount of basic pay last drawn X 12 X leave at his credit (max 365 days)/365 days, the resultant figure would be amount of leave encashment. (if a employee opts to draw the leave encashment at the time of retirement)

            I hope this will make us more clear.

            with best regards
            sajid

          • Dear to confirm this formula plz visit any reknowned account office as a few account officers are aware of it. And to add u that many employees have got their incashment according to this formula.

  8. ghulam hassan says:

    when pay fixed in 2001 annal increment will be given.

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