There is no single national leave entitlement in India. Earned leave, casual leave and sick leave derive largely from state shops and establishments legislation and the Factories Act, which means your entitlements depend on where your employees work.
The statutory floor
Earned or privilege leave. Typically accrues at around one day per 20 days worked, giving roughly 15–21 days a year depending on state. Generally must be allowed to carry forward, often up to a cap of 30–45 days.
Casual leave. Commonly 7–12 days a year, for short unplanned absences. Usually lapses at year end and is usually not encashable.
Sick leave. Commonly 7–14 days a year. Some states permit requiring a medical certificate beyond a threshold of consecutive days.
National and festival holidays. Three national holidays — 26 January, 15 August and 2 October — are mandatory. Beyond those, state rules specify a number of festival holidays.
Statutory special leave
- Maternity leave — 26 weeks for the first two children, 12 weeks thereafter, under the Maternity Benefit Act. Applies to establishments with 10 or more employees; the employee must have worked at least 80 days in the preceding 12 months. Also includes provisions for adoption, commissioning mothers, and a work-from-home option where the role permits.
- Paternity leave — no central statutory entitlement for private employers. Most organisations now offer 5–15 days voluntarily, and it is increasingly expected.
- Bereavement, marriage and study leave — discretionary, but worth defining so managers are not improvising.
Design decisions that matter
Accrual: monthly or annual? Monthly accrual is fairer for joiners and leavers and avoids someone taking a full year's leave in February and resigning in March. Annual crediting is simpler to explain. Monthly is generally the better choice.
Carry-forward cap. Required for earned leave in most states, but you can cap it. Without a cap, you accumulate a growing encashment liability and, eventually, a December in which half the company is away.
Encashment. Decide whether it happens annually, only at exit, or both. Encashment during employment is taxable as salary; at retirement, limited exemptions apply. Note that encashment of earned leave is a statutory entitlement at exit in many states, so this is not entirely optional.
Negative balance. Allowing employees to go into negative leave creates recovery problems at exit. If you permit it, cap it tightly and document the recovery mechanism.
Approval rules. Notice period for planned leave, how many team members may be away simultaneously, blackout periods for business-critical weeks, and who approves what. Vague approval rules generate most leave friction.
What your system needs to handle
- Different entitlements by location, grade and employment type
- Pro-rated accrual for joiners, leavers and employees on long leave
- Half-day and hourly leave if your policy allows it
- Holiday calendars by location
- Carry-forward and lapse processing at year end, automatically
- Encashment calculation feeding into payroll
- Balance visibility in self-service — most leave queries exist because employees cannot see their own balance
- Reconciliation with attendance, so approved leave is never double-counted as absence
