Can we give leave encashment to IT consultant? We are giving monthly fees after deducting TDS Please guide me
From India, Pune
From India, Pune
A consultant is not an employee. As such he is not expected to follow the leave rules, rules relating to hours of work, office timing etc. His fee will be paid as per the bill raised by him. No PF is deducted from it. He is given form 16A and not form 16 in respect of TDS deducted. As such, he is not an employee and not eligible or leave or leave encashment.
However, many IT Companies who believes that labour laws are not applicable to them, engage employees are consultants! They are designated as consultants but are expected to reach the office in time, remain in the office or 8 to 9 hours, follow the dress codes at par with others, avail leaves, report to somebody on daily basis etc. This is an arrangement to avoid paying PF, Bonus and other benefits available under labour laws. When he leaves the organisation after long service he will not be paid gratuity saying that he was not an employee.
If your Consultant falls under the second type, he should be given leave encashment.
From India, Kannur
3891However, many IT Companies who believes that labour laws are not applicable to them, engage employees are consultants! They are designated as consultants but are expected to reach the office in time, remain in the office or 8 to 9 hours, follow the dress codes at par with others, avail leaves, report to somebody on daily basis etc. This is an arrangement to avoid paying PF, Bonus and other benefits available under labour laws. When he leaves the organisation after long service he will not be paid gratuity saying that he was not an employee.
If your Consultant falls under the second type, he should be given leave encashment.
From India, Kannur
Why this question arises to pay or not to pay leave encashment to IT consultant?
You only have to pay the amount as per the contract/agreement signed with the consultant. You have to pay leave encashment, if there is a provision in signed contract/agreement.
From India, Mumbai
You only have to pay the amount as per the contract/agreement signed with the consultant. You have to pay leave encashment, if there is a provision in signed contract/agreement.
From India, Mumbai
Hi Madhu,
Hope you are doing great. Thank you for this valuable post. I need some suggestion regarding "If your Consultant falls under the second type, he should be given leave encashment." Please let me know how do we calculate leave encashment for this second type of consultant employees as there's only TDS deduction.
From India, Bengaluru
Hope you are doing great. Thank you for this valuable post. I need some suggestion regarding "If your Consultant falls under the second type, he should be given leave encashment." Please let me know how do we calculate leave encashment for this second type of consultant employees as there's only TDS deduction.
From India, Bengaluru
Take his monthly fixed remuneration and divide it by 30 to get his daily average remuneration and multiply this with the number of days leave that he wishes to encash.
From India, Kannur
From India, Kannur
Thank you Madhu for your valuable response. So encashment is solely employer’s decision right? I mean whether it is during service or after resignation.
From India, Bengaluru
From India, Bengaluru
Encashment while in service is as per service conditions but encashment of unavailed leave(PL) is mandated by law when it is accrued due to his leaving the company.
From India, Kannur
From India, Kannur
Thank you again for the suggestion. One final query Madhu, can you please confirm if we calculate leave encashment for full time employees like this: (Basic Pay/30)*No. Of Leaves
From India, Bengaluru
From India, Bengaluru
If your allowances like HRA, Conveyance allowance etc are fixed allowances which are part of salary for deduction in proportion to the days an employee remains absent without leave, then encashment of leave should be on the salary inclusive of allowances. At the same time, if you pay HRA etc when he is on leave without pay and pay is deducted only from the basic pay, then you can take basic pay for encashment of leave. In any case, if the employee is paid monthly salary, you can use 30 as divisor and if daily rated, use 26 as divisor
From India, Kannur
From India, Kannur
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
EPFO Circular Leave Encashment.jpg