When does an employer have to provide for Leave Encashment in his books of account?
As per AS-15(R), employee benefits are categorized into long term and short term benefits. A long term liability is created if the benefit is payable after more than one year and a short term liability is created in the benefit is payable within a year. If the lave encashment rules provide that the balance leave will be encashed and paid to employees within the year, then it is a short term liability. No provisioning in the books of accounts is to be done in this case. However if the leave can be accumulated for a period of more than 12 months, then the liability has to be actuarially determined and provided for on the balance sheet date.
Related Questions
- Even though an employer is not required to pay for leave under the Act, what about continuation of health care benefits, vacation accrual time, holiday pay, pension accrual time and other benefits?
- May an employer request that an employee provide a doctors excuse or other explanation when the employee has used sick leave?
- When does an employer have to provide for Leave Encashment in his books of account?
