How to Process Leave Encashment for More Days Than the Available Leave Balance in F&F

Customer Requirement / Question

The customer wants to process 10 days of paid leave encashment for an employee during the Full & Final Settlement (F&F). However, the employee's current leave balance is showing only 2 days in the F&F Leave section.

The customer wants:

• The F&F settlement to show 10 days as the encashed leave balance.
• The employee to be paid for 10 days of leave encashment.
• The corresponding leave encashment amount to be considered for the applicable tax exemption calculation.

Clarification

The Leave Encashment days available in F&F are based on the employee's available leave balance.

Therefore, the additional 8 days cannot be added as an ad-hoc payment to achieve the required leave encashment. An ad-hoc payment would only add an amount to the settlement and would not increase the leave encashment days or treat the amount as leave encashment for the applicable tax exemption calculation.

If the employee is genuinely eligible for 10 days of leave encashment, the employee's leave balance should first be corrected to reflect the eligible balance.

Note: The leave balance should only be updated when the employee is actually eligible for the additional leave days.

Step-by-Step Process

Step 1 – Update the Employee's Last Working Day

If the employee has already been marked for exit, the leave balance may not be directly editable from the employee profile.

1. Go to Employee Profile.
2. Take the required action to extend or update the employee's Last Working Day (LWD) to the current date or a future date.
3. This will make the employee active again, allowing the leave balance to be updated.

Step 2 – Update the Leave Balance

1. Go to Employee Profile → Leave.
2. Select the applicable Leave Plan/Leave Type.
3. Manually update the employee's leave balance to 10 days, provided the employee is eligible for the 10 days.
4. Save the updated leave balance.

Step 3 – Verify the Updated Balance

After updating the leave balance:

1. Verify that the employee's available leave balance is showing 10 days instead of 2 days.
2. Ensure that the updated balance is accurate before proceeding with the F&F settlement.

Step 4 – Process the Full & Final Settlement

1. Update the employee's Last Working Day back to the correct date.
2. Proceed with the employee's Full & Final Settlement.
3. Navigate to the Leave Encashment section.
4. Verify that the updated 10 days of leave balance are available for encashment.
5. Process the leave encashment for the required 10 days.

Step 5 – Leave Encashment Calculation

The leave encashment amount will be calculated based on the applicable leave encashment formula/configuration in the system.

As a result:

• The F&F settlement will reflect 10 days of leave encashment.
• The corresponding leave encashment amount will be calculated based on the configured formula.
• The amount will be treated as leave encashment rather than an ad-hoc payment, allowing it to be considered appropriately for the applicable tax exemption calculation.

Important

Do not use an ad-hoc payment to compensate for the additional leave days when the employee is genuinely eligible for leave encashment.

The employee's leave balance should first be updated to the actual eligible balance, after which the leave can be processed through the Leave Encashment section of F&F.