There are two types of components answering to the name “Leave Encashment”.
One is paid to the Employees on exit, during settlement process
Another is paid to the Employees during service period based on the No of available Encashable Leaves.
Let’s look into the configuration and computation of these both separately.
Paid while in Service:
Please create a Pay component Leave Encashment; abbreviation can be “LE”.
Configure it as below: “Earnings”, “Paid”, “Taxable” and “Not distributed across the year”
This should be a “Variable Component” too.
Map this to “Leave Encashment” before saving.
Calculation Type can be as per the Client requirement, either Flat or Formula-based.
And amount to be updated against the concerned or eligible Employees by way of “Manage Pay Adjustments” during Pay process, if component is configured FLAT
If it FORMULA based configuration, the leave encashable days has to be entered under Go to Transactions >> Leave/Time Management >> Leave Encashment.
Paid on Separation:
Please create a Pay component Leave Encashment; abbreviation can be “LES”.
Configure it as below: “Earnings”, “Paid”, “Taxable” and “Not distributed across the year”
This should be a “Variable Component” too.
Map this to “Leave Encashment Not Taxable” before saving.
And please ensure the “Is an FFS Component” checkbox is ticked; only then this would reflect while generating FFS.
Calculation Type can be as per the Client requirement, either Flat or Formula-based.
If it is “Flat”, then the amount should be manually entered while processing FFS.
And if this is “Formula" based, then on processing FFS, if the number of Encashable days is updated, the amount will be automatically captured.
Please Note:
In the Leave Configuration under Encashment, we need to ensure the “Is Encashable” checkbox is ticked.
And update the maximum number of Encashable days.
Also, formulas should be updated here too if we need this formula based; if flat, we can leave this blank.