What Is Leave Encashment?

Leave encashment is the concept of paying employees for their unused vacation days. This is usually done once per year, but you can offer vacation pay on a more frequent basis as well, like every six months.

What are the benefits of leave encashment?

The main benefit of leave encashment is that it’s essentially an additional workplace benefit. It allows your staff to take advantage of vacation leave indirectly, providing them with a greater level of flexibility. Employees who don’t go on vacations often won’t have to worry about missing out on their perks with leave encashment.

What are the disadvantages of leave encashment?

Leave encashment policies can sometimes encourage employees to avoid vacations on purpose to earn extra pay. In the short-term, this won’t have many negative effects on your business. However, avoiding time off for extended periods of time can lead to burnout, the negative effects of which are plentiful.

How can you track unused leave balances for leave encashment?

To track your team’s unused leave balance, you can use a workforce management app with a built-in leave management tool. For example, you can use WebWork’s Leave Management functionality to track how much leave each of your employees has remaining across several leave policies.

Is leave encashment legal?

In most cases, leave encashment is legal. However, it can even be mandatory in some situations, like upon termination of employment. Consult with a local labor lawyer to find accurate info on what laws your business has to abide by.