Leave Encashment for Unutilized Leave Balance

Encashing an employee’s unutilized leave means paying them the remaining balance of their leave entitlement at their normal daily pay. This feature is controlled by your Payroll Policy settings.

To process leave encashment, you first need to create a payroll item and then add it in employee's Individual Transaction.

Step 1

1. On the left menu, go to Settings > Payroll > Payroll Items.
2. Select the Leave Encashment tab.
3. Click Add New to create new payroll item.

Step 2

Fill in the Name and Label, ensure the Tax Category and EA Form are correct, as well as other Government Statutory categories.

It is advisable to keep Include in EPF Monthly Wage toggled off, as this is a one-off payment.

Step 3

After creating the payroll item for leave encashment, go to Payroll > Transaction > Individual Transaction.

1. Select the employee and click Edit (top right).
2. Choose the correct Transaction Month and Pay Cycle created for leave encashment.
3. Go to the Leave tab. Under Transaction Details, click Add.
4. Enter the following details:
   • Date: cannot be the same date as the Month End cycle payment date
   • Payroll Item: select the Leave Encashment item you created
   • Days: enter the leave balance and any remarks if necessary
5. Click Update and also Save to confirm the transaction.

Step 4

Process payroll for the employee accordingly. The Leave Encashment payroll item will appear in the payslip.

We hope this explanation clarifies the matter. If you require additional assistance, do not hesitate to contact our support team.