What is Leave Credit?

Leave credit is the amount of paid time off that a company adds to employees’ leave balance. Employees are allotted paid leave every month or over a calendar year which they can use as per their convenience. If employees have accumulated a lot of time off, they can always opt to use it before the respective period or encash it.

Key aspects of leave credit

When it comes to leave credit there are many aspects related to it like – leave accumulation, usage and expiration-

• Leave balance: Leave balance is the number of leaves an employee has left from the leaves credited to them by the employer.
• Leave accumulation: Leave accumulation is the number of leaves an employee has accumulated over the time working for the employer. If an employee does not use the allotted leaves, they can accumulate it. They can either use it or encash it by the end of the year.
• Leave usage: Leave usage is the leaves that are used by an employee. For example, if an employee is credited 2 earned leaves a month, and they use only 1 leave, then their leave usage is 1 and their leave balance for that month is 2-1=1.
• Carryover: There are certain types of leaves like earned leaves that can be carried over to the next pay cycle or annual year. An employee has 3 options – they can use all their earned leaves for the year, they can ask the HR department to credit it to their account, and they can carry the leave over to the next calendar year.
• Leave encashment: If an employee has accumulated leaves in their leave balance by the end of the year, they can always ask the HR to encash the leaves. Compensation for 1 leave is the average pay an employee receives in a day. For example, an employee earns INR 50,000/month, their per day wage is 50,000 / 26 = 1923. So, if an employee has 3 earned leaves in balance at the end of the year and they want to encash it, they will receive Accumulated leaves X per day wage = leave encashment. In this case, it will be INR 5769.
• Leave expiration: There are some types of leaves that cannot be encashed. Casual leaves cannot be encashed like earned leaves. So, if an employee does not use it before the set period, then the leaves will expire.

Leave Credit – FAQs

What does leave on credit mean?

Leave on credit for an employee means the leave allotted to an employee after they work for a certain number of days with the company.

What does available leave credits mean?

It means the number of leaves an employee has in their leave balance.