Sri Lanka Leave Encashment Calculator

Two statutory regimes govern leave encashment in Sri Lanka. The public-sector rule comes from Chapter XII Part II of the Establishments Code, and the private-sector rule comes from Section 6 and Schedule II of the Shop and Office Employees (Regulation of Employment and Remuneration) Act No 19 of 1954. The day-rate formula differs between the two; everything else (cap, tax) is sector-specific.

Step 1 — find the daily wage

Public sector. The Code fixes the divisor at 30, irrespective of the calendar month or number of weekends. The daily wage is monthly consolidated salary ÷ 30. Consolidated salary, as defined by Public Administration Circular 03/2016, is the basic salary plus the Adjusted Cost-of-Living Allowance and any other interim allowances that form pensionable salary at the date of payment. Non-pensionable items such as overtime or transport allowance are excluded.

Private sector.The Labour Department's standard interpretation of Section 6 is that the daily wage equals monthly basic ÷ working days in the month. The most common divisor is 26 (Monday to Saturday); for offices on a five-day week the divisor is 22. The tool defaults to 26 and lets you override when your contract or pay-slip uses a different figure.

Step 2 — apply the statutory cap (public sector only)

At retirement, the Establishments Code caps encashable vacation leave at 84 days. If your accrued balance is higher, the excess lapses. During service, the year-end carry-forward ceiling is 35days in most Departments — anything above that on 31 December lapses unless used as leave or encashed with specific authorisation. The carry-forward branch of this calculator does not pay out at-risk days; it only shows what they would be worth, so you can decide whether to take the leave before year end. The Shop and Office Employees Act has no equivalent statutory cap — the private-sector calculation pays the full unused balance, subject to whatever contractual ceiling your employer's HR policy specifies.

Step 3 — compute the encashment

The arithmetic is encashment = days paid × day rate, rounded to the nearest cent. The tool keeps full precision on the day rate until the final multiplication so that boundary cases (84 days exactly, fractional consolidated salaries) reconcile to the rupee against a hand calculation. An internal cross-check function re-derives the day rate by an independent long-hand split of rupees and cents; the two paths must agree before the result is rendered.

Step 4 — tax treatment

Encashment paid at retirement is part of cumulative terminal benefits under Section 65 and the Third Schedule of the Inland Revenue Act 2017. The slabs apply to total terminal benefits in the year of assessment: the first Rs 10,000,000 is nil-rated, the next Rs 10,000,000 is taxed at 6%, and the balance at 12%. Most mid-career civil servants never reach the second slab on encashment alone — but combined with gratuity and the commuted pension lump sum, a Rs 5 mn–Rs 10 mn encashment can push the total package across the 6% threshold. The toggle in the calculator shows an indicative tax on the encashment slice in isolation; for the full retirement package use the gratuity, EPF, and APIT tools together. Outside retirement — on resignation or termination — encashment is ordinary employment income, added to the month of payment and taxed at the APIT marginal rate. The Sri Lanka Tax Calculator handles that path.

What the calculator does not cover

Three categories are deliberately out of scope. Wages Boards industries — plantation labour, garment piecework, certain factory categories — follow sectoral leave schedules set by their respective Wages Boards, which override the Shop and Office Act defaults; for those, check the relevant Wages Board notice directly. Casual and sick leave are non-cumulative welfare entitlements under both regimes; they are not encashable and the tool does not let you enter them. Accrual itself is the job of the Annual Leave Calculator; this tool assumes you already know the unused balance and computes only the cash value.

Each example is hand-computed against the cited formulas; plug the inputs into the calculator above and the result panel should match to the rupee. The third scenario is the high-earner case where the terminal-benefits tax slab kicks in.

• Ministry of Public Administration — Establishments Code (Chapter XII Part II covers vacation leave + encashment)
• Public Administration Circular 03/2016 — consolidated-salary definition
• Shop and Office Employees Act No 19 of 1954 (Section 6 + Schedule II)
• Department of Labour — Wages and Conditions of Employment FAQ
• Inland Revenue Act No 24 of 2017 — Section 65 + Third Schedule (terminal-benefits slabs)

Formulas, the 84-day cap, and the terminal-benefits slabs on this page were last cross-checked against the cited sources on 2026-05-16. The page is reviewed after every Establishments Code update circular and every Inland Revenue Amendment Act.