Comp Off leave encashment

Dear Team,

Could you please help me on this below query?

Our employees have worked on their week offs in order to meet the company requirements, so we have granted the Comp-Off’s for them. Now we want to encash their Comp-Off leaves, so on what bases the payment has to be made, is it on total Gross or Basic+Allowances?? please suggest

Thanks & regards
Santosh Sambara


Hello @Executive,

Hope you are doing well.

Let us break the question into parts to answer them.

Q1 - What is the legal position of compensatory off in Indian employment/labour laws?

Answer: Compensatory off is dealt by the respective State’s Shops and Establishments Act and Factories Act/State Rules.

So based on the establishment’s present, it has to refer to the corresponding state laws.

Q2 - Whether comp off can be encashed?

Answer: Laws are silent about this. The objective of giving a comp off is to ensure the employee is given a break from work to have work-life-health balance.

Hence employer is in a position to carefully understand the corresponding state laws here as it mandates to provide comp off where an employee is asked to work for a continuous period with no rest day.

Comp off encashment defeats the purpose of giving rest day to the employee.

If the employer brings in this arrangement it has to ensure that it is a reasonably convincing one to have employee consensus for comp off encashment arrangement.

Q3 - If comp off to encashed will it be on the gross pay or basic+allowances.

Answer: The comp off is equivalent to the weekly holiday (paid by the employer). So, the same rule to be applied.

Hope this helps.

Expert courtesy to Bhuvana Anand


Yes, it is helpful. Thanks for the information Kaulin.


Heard about this como off credit, lapse and then employees seeking encashment from many places. It is really insightful. Thank you @Kaulin and @Bhuvana_Anand