Leave Encashment

Days a man did not take, paid as money. Pick the reason, pick the people, and the screen works out how many days each one may encash, what a day of his is worth and what that comes to. On approval the balance is consumed and the payment is raised.

Where

Time Management › Transactions › Leave Encashment

Who uses it

HR, approved by whoever authorises payments

When

At the leave year end, on request, or at a final settlement

Needs first

Encashable ticked and an Encashment Divisor on the Leave Group

What it is for

A man has nine days of annual leave he will not take and the company would rather pay him than carry them. This screen does that.

Nothing is configured here. Every rule comes from the Leave Group line for that leave type, and this screen only applies them.

• Whether the type may be encashed at all.
• The most days he may encash in a leave year, counted across every encashment he has already had this year.
• How much balance he must keep behind.
• Which salary figure a day is worked out from, and what it is divided by.

Two of those decide the money and they are worth saying in plain words, because a client will ask.

Encash rate basis is which salary figure the day rate is worked out from. Basic salary uses his basic pay alone. Gross salary uses his basic plus his recurring allowances. Basic is the common Pakistani choice and the cheaper one, and the difference on a man with a large house rent allowance is not small.

Encashment divisor is how many days that monthly figure is divided by to get one day's money. Thirty treats a month as thirty days including the rest days. Twenty six treats it as the working days of a six day week. Twenty two, a five day week. The same balance paid on the same salary comes out meaningfully different on each, so get it agreed and written down rather than guessed. The worked comparison is on the maths.

The reason on the document is not a label. It changes what the screen does.

On request, HR names the people and the days. It is the ordinary case, one or a few lines.

At the year end with an empty grid, the screen fills it with every employee holding an encashable balance above the minimum keep, which is what makes a five hundred person year end possible at all. Check the lines, remove the ones the client does not want paid, and save.

At a final settlement, the minimum keep is waived, because there is no later year for the man to keep a balance for. Everything he holds is encashable up to the yearly cap.

The two sides of the screen are the balance and the payment, and both have to work. A wage type turns the encashment into one payment document for the man, which payroll then pays in the pay period named on the header. With no wage type, the balance is still consumed and the payment is left to be raised by hand, which is occasionally what a client wants and more often a mistake.

Every field, in plain words

Basic Data

Field	What it means	What to put in it	Notes
Transaction	The document number.	Fills itself. Leave it.
Transaction Date	The date the encashment is made.	31-Dec-2026	Required. It is also the date the man's salary is read as at, so a document dated before a pay rise uses the old salary.
Reason	Why the encashment is being done.	YER at a year end	Required. The three values are below, and they change what the screen does.
Wage Type	Which wage type the money is paid under.	The leave encashment wage type	Pick from the list. Leave it empty only where the client means to raise the payment by hand, and say so in Notes if you do.
Name	The wage type's name.	Fills itself. Leave it.
Pay Cycle	Which payroll cycle the payment belongs to.	The monthly staff cycle	Required. A payroll cycle and a pay period are needed to pay the encashment through a wage type.
Pay Period	Which period inside that cycle it is paid in.	December 2026	Required. Pick a period that is still open, or the payment will not be picked up.
Total Days	The days being encashed on the whole document.	Fills itself from the lines. Leave it.
Total Amount	The money the whole document comes to, in rupees.	Fills itself from the lines. Leave it.	Read it before approving. It is what the client is agreeing to spend.
Notes	Anything worth recording.	Year end encashment 2026, approved in the November management meeting
Responsible	Who is accountable for the document.	The HR manager	Pick from the list.
Responsibility Central	The responsibility centre it is reported against.	Fills itself from the employee where it is set.	Pick from the list.

The Reason values:

• REQ Employee Request - one man asked to encash some days. Name him and the days on a line yourself.
• YER Year End - the yearly clearing. Leave the grid empty and the screen fills it with everybody who holds an encashable balance above the minimum keep. Nobody below the minimum keep appears, which is correct, and if nothing appears at all then nobody qualifies.
• SEP Final Settlement - a leaver. The minimum keep is waived, so his whole balance is encashable up to the yearly cap.

Details

One line per employee and leave type.

Field	What it means	What to put in it	Notes
Line #	The line number.	Fills itself. Leave it.
Employee	Whose balance is being encashed.	EMP-0142	Required. Pick from the list. On a year end run the lines arrive filled.
Name	Their name.	Imran Shahid	Fills itself. Leave it.
Leave Type	Which balance is being encashed.	ANN	Required. Only a type the leave group marks encashable may be used.
Name	The leave type's name.	Annual Leave	Fills itself. Leave it.
Balance	What he holds of that type.	Fills itself. Leave it.
Encash Days	How many days are being paid.	7	Required. It cannot exceed what the rules allow, which is the balance less the minimum keep, and no more of the yearly cap than he has left. Half days are allowed.
Rate per Day	What one day of his is worth, in rupees.	Fills itself. Leave it.	The salary figure the basis names, divided by the divisor. A basic of 45,000 over a divisor of 26 is 1,730.77.
Amount	What this line comes to, in rupees.	Fills itself. Leave it.	The days times the rate. Seven days at 1,730.77 is 12,115.39.

How to configure it

1. On the Leave Group line for annual leave, tick Encashable and fill Encashment Max Days, Balance To Keep, Encashment Rate Basis and Encashment Divisor. Without a divisor nothing on this screen can work out a rate.
2. Create the leave encashment wage type on the payroll side so there is something to pick.
3. Settle with the client whether encashment happens before or after the Leave Allocation Run. Encashing first means the carry forward cap applies to a smaller balance, which usually suits the client, so say which order you used.
4. Open the screen, set the Transaction Date, pick the Reason, the Wage Type, the Pay Cycle and an open Pay Period.
5. For a year end, leave the grid empty and create the document. The lines come back filled with everybody who qualifies.
6. For a request, add one line with the Employee, the Leave Type and the Encash Days.
7. Read Rate per Day on a line you know the salary for and check it against the divisor the client agreed. This is the one check worth doing by hand, every time.
8. Read Total Amount, then save and send it for approval.
9. On approval the balance is consumed and the payment is raised against the wage type. Check it appears in the pay period before payroll is run.

Scenarios

"Pay out everybody's leftover annual leave at the year end"

Reason YER, grid left empty. Everybody holding an encashable balance above the minimum keep appears with their days, their rate and their amount. Go through the lines, delete the ones the client does not want to pay, and save. If the grid comes back empty, nobody holds a balance above the minimum keep, which is a configuration answer rather than a data problem.

"A man wants to cash in five days in March"

Reason REQ, one line, Encash Days 5. The screen will reduce or refuse it if the balance less the minimum keep does not allow five, or if he has already used most of the yearly cap.

"He is leaving at the end of the month"

Reason SEP. The minimum keep is waived, because keeping days back for a man who is going makes no sense. The yearly cap still applies, so if the client means to pay everything regardless, the cap on the leave group is what to look at.

"He has twelve days and the screen will only let him encash seven"

Balance To Keep is 5 on that leave group line. Five is reserved and seven is encashable. If he had already encashed days earlier in the year, Encashment Max Days may be cutting it further.

"Our day rate is wrong, everybody is being paid too much"

Almost always the divisor. Thirty on a six day week factory pays a smaller day than twenty six and a bigger one than twenty two, and whichever the client's letter of appointment implies is the one to use. Change Encashment Divisor on the Leave Group and make the document again. See the maths for the comparison to show the client.

"The balance went down and nobody got paid"

No Wage Type was named. The days have been consumed and the payment was left to be raised by hand. Either raise it, or reverse the encashment and do it again with a wage type.

What it is connected to

• The Leave Group holds every rule applied here, including Encashable, Encashment Max Days, Balance To Keep, Encashment Rate Basis and Encashment Divisor.
• Leave Allocation Run and Employee Leave Entitlement built the balance being paid out.
• The man's recurring payments are where the basic or gross figure is read from, as at the Transaction Date.
• The wage type named here carries the money into the employee's additional payment, which Payroll pays in the named pay period.
• Days are taken from the quota that lapses soonest, so a carried forward balance about to expire is used before a fresh one. That is deliberate and it is in the employee's interest.
• the maths carries the worked arithmetic with the 30, 26 and 22 divisor comparison.

If something looks wrong

• "It says the leave group has no encashment divisor for this type" - Encashment Divisor is empty or zero on that leave group line, so no day rate can be worked out. Put 26 or 30 in it.
• "It says no employee holds an encashable balance above the minimum keep" - a year end run found nobody who qualifies. Check Encashable is ticked and Balance To Keep is not set higher than everybody's balance.
• "He may encash fewer days than he holds" - Balance To Keep is reserving some, or Encashment Max Days has already been part used this year.
• "The amount is far too high or too low" - read Rate per Day. It is the Encashment Rate Basis, the salary behind it and the divisor, in that order of likelihood.
• "The rate used last year's salary" - the Transaction Date is before the pay rise. The salary is read as at that date.
• "A payroll cycle and pay period are needed" - a wage type is named but no cycle and period, so there is nowhere for the payment to go.
• "The payment is not in the pay period" - the period named on the header is closed, or payroll was run before the encashment was approved.
• "The leave type is not in the list" - the leave group does not mark it encashable, or the man's group does not give him that type.