Leave Encashment

What is Leave Encashment in Zoho People?

Leave Encashment converts unused leave balance into a cash payment. The amount is calculated as: (Basic Salary / Number of Working Days) x Number of Leave Days Encashed. In India, earned leave encashment at separation is largely tax-exempt for government employees and subject to a tax exemption limit for private-sector employees under the Income Tax Act.

When encashment occurs

• At year-end: Some organisations allow employees to encash a portion of their accumulated earned leave annually, subject to a minimum retention requirement (e.g., must retain at least 15 days after encashment).
• At resignation or retirement: The remaining earned leave balance is encashed as part of the full and final settlement.

Processing in Zoho People and Payroll

When Zoho People is integrated with Zoho Payroll, the leave encashment amount is automatically calculated from the leave balance and included in the final payslip or the year-end payroll run without manual computation.