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.