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India’s leave rules depend on the state, establishment and employee category. This guide compares earned, casual and sick leave in eight hiring locations and explains labour-code changes, accrual, holidays, carry-forward, encashment, probation and policy design for Indian and international employers.
A leave policy in India must reflect the law covering the establishment, the employee’s work location and category, and any more favourable employment terms. There is no single national allowance of earned, casual and sick leave that applies to every private-company employee. State rules and the newer central labour codes need to be read together.
For a business hiring across Bengaluru, Pune, Hyderabad and Delhi, the challenge is not choosing a generous-looking total. It is getting each leave category, eligibility rule, payment rate and unused balance right. A policy can offer plenty of days overall and still mishandle sick leave or encashment.
This guide explains the main leave categories, compares eight important hiring locations, and shows how to administer leave across states. It covers ordinary adult employees in shops and commercial establishments, with a separate explanation of the Occupational Safety, Health and Working Conditions Code. Factories, mines, government service and exempt employee categories need their own coverage assessment.
Private companies must provide the leave rights that apply to their establishment and employees, then honour any additional benefits promised in their contracts or policies. The starting point is legal coverage, not an all-India HR template.
Three layers usually need attention: the applicable state Shops and Establishments law, central legislation covering the employee or benefit, and contractual terms. National and festival holiday requirements form another part of the local assessment.
India made its four labour codes effective from 21 November 2025. For annual leave, the relevant central legislation is the Occupational Safety, Health and Working Conditions Code, 2020, commonly called the OSH Code. Maternity benefits sit within the Code on Social Security, 2020.
The OSH Central Rules notified on 8 May 2026 are final rules, not merely the earlier draft. However, central rules do not automatically govern every state-regulated office. Identify the appropriate government and the applicable rules, notifications and exemptions for the establishment.
No. Those numbers are not a universal private-sector entitlement. Different laws prescribe fixed annual allowances, service-based accrual, separate sick and casual categories, or a combined allowance.
Before comparing two job offers, ask what each number means. Does “24 days of paid leave” include sickness? Are public holidays additional? Can unused earned leave carry forward? When does eligibility begin? Without those answers, the headline total tells only part of the story.
Earned leave normally supports planned time away, casual leave covers short personal absences, and sick leave covers illness or injury. Their legal treatment can differ even when an employer displays them together as paid time off, or PTO.
| Leave category | Main purpose | What the policy must explain |
|---|---|---|
| Earned leave or privilege leave, EL or PL | Planned holidays and longer personal breaks | Accrual, eligibility, booking, carry-forward and encashment |
| Casual leave, CL | Short personal needs or unexpected commitments | Annual allowance, notice, permitted duration and expiry |
| Sick leave, SL | Illness, injury or medically necessary absence | Pay, evidence, notification, balance and extended absence |
| Statutory maternity leave | Qualifying maternity-related events | Coverage, eligibility, benefit route and protected absence |
| Public holidays and weekly rest | Scheduled days away from work | Local calendar and compensation when work is required |
| Additional company leave | Benefits such as bereavement or parental leave | Who qualifies, duration, pay and any use window |
They often refer to the same broad category of paid holiday, but the policy label does not determine the legal rules. The governing law determines how the entitlement arises and what happens to unused days.
Use one employee-facing name consistently. If payroll calls a balance PL and the handbook calls it EL, explain that relationship. Otherwise, staff may believe they have two separate allowances or fail to recognise an amount owed at exit.
A combined balance needs to preserve every applicable entitlement and condition. Some state laws already combine sickness and personal-cause leave. Others provide separate categories that should not disappear inside a smaller pooled allowance.
For example, a policy offering 18 flexible days should not be treated as automatically equivalent to 12 casual days plus 12 sick days where both categories apply separately. The employee must be able to use the protected entitlement for its intended purpose. Carry-forward and payment rules also need separate tracking when they differ.
“Unlimited leave” still needs an accounting method for statutory accrual, approvals and amounts due. Removing a visible limit does not answer those questions.
The OSH Code introduced a 180-day qualifying threshold for covered workers and specific rules for annual leave, unused balances and encashment. It did not turn every salaried employee into a covered worker or erase all state leave provisions.
The rule concerns workers in establishments covered by the OSH Code. The Labour Ministry’s OSH Code eligibility guidance confirms the general 180-day criterion. Do not copy the older Factories Act’s 240-day threshold into every current policy.
The Ministry’s March 2026 clarification on leave coverage explains that these provisions apply to workers, including qualifying supervisors earning no more than ₹18,000 per month. Managerial or administrative roles are not automatically covered. The ₹18,000 figure is not a blanket salary ceiling for everyone doing non-supervisory work.
Assess actual duties and establishment coverage. A job title such as “executive” or “manager” is not enough to decide which statutory definition applies.
Section 32 of the OSH Code sets the following rules for the ordinary adult-worker category:
The Ministry’s March clarification also says inconsistent state provisions give way to the Code while more favourable state benefits remain available. A state’s higher accumulation allowance therefore needs consideration, not automatic replacement with “30 days everywhere.”
The table below compares selected state-law provisions for ordinary adult employees in covered shops and commercial establishments. It is not a universal allowance for everyone working in that state. Apply the OSH overlay described above where relevant, and check exemptions, service conditions and more favourable terms before configuring payroll.
These provisions show why a single India-wide number is unreliable. “Combined” means one shared statutory allowance, not the stated number twice.
| State and main hiring locations | Earned or privilege leave | Casual and sick leave | State-law accumulation |
|---|---|---|---|
| Maharashtra: Mumbai and Pune | 1 day per 20 days worked after the state Act's 240-day test. Section 18 also has a separate provision for shorter service. | 8 CL days, credited quarterly. Section 18 does not specify a separate general SL allowance. | EL up to 45 days |
| Karnataka: Bengaluru | 1 day per 20 days worked for adults | 12 days combined for sickness, accident or another reasonable cause | EL up to 45 days, following the 2021 amendment |
| Tamil Nadu: Chennai | 12 days after 12 months' continuous service | Up to 12 SL days and 12 CL days under Section 25 | EL up to 45 days |
| Telangana: Hyderabad | 15 days after 240 days' service in a continuous 12-month period under the state Act | Up to 12 SL days and 12 CL days | EL up to 60 days |
| Delhi | At least 15 days after 12 months, with an interim entitlement of 5 days per completed 4 months | At least 12 days combined sickness or casual leave | PL up to 3 times the annual entitlement, normally 45 days at the statutory minimum |
| Haryana: Gurugram | 1 day per 20 days of employment under Section 14 | 7 CL days and 7 SL days | Ordinarily 30 EL days for adults, subject to the Act's agreement provisions |
| Uttar Pradesh: Noida | At least 15 days after 12 months' continuous employment | At least 10 CL days. At least 15 SL days after 6 months' continuous employment | EL up to 45 days |
| West Bengal: Kolkata | 14 days on full pay per completed year of continuous service | 10 CL days on full pay and 14 SL days on half pay with medical certification | PL up to 28 days. SL up to 56 days. CL does not accumulate. |
State-law figures are shown deliberately as state-law figures. For a worker also covered by the OSH Code, do not impose the Maharashtra or Telangana 240-day test without assessing the Code’s earlier eligibility. Likewise, West Bengal’s 28-day privilege-leave limit is not a reason to deny an applicable central entitlement.
Pay rate, combined categories and special conditions are the details most likely to disappear in a simple leave-count table.
West Bengal’s 14 sick days are not 14 days at full pay under the cited provision. Karnataka’s 12 days cover sickness, accident and other reasonable causes together. Maharashtra’s absence of a separate SL figure in Section 18 does not establish that every sick employee can be put on unpaid leave. Other applicable protections and contractual benefits still need checking.
Telangana’s Section 30 also provides for eight days of annual leave encashment each year. Treat that as a separate payroll checkpoint. Do not infer that every state uses only an exit-time encashment model.
The table is selective, not a 28-state compliance register. Before hiring in another state, build a local schedule from its law. Before relying on an older Act PDF, check subsequent amendments and coverage notifications. This matters particularly where small-establishment thresholds or sector exemptions have changed.
Calculate the legal entitlement using the correct accrual unit first, then compare it with the company’s promised benefit. A monthly software credit is an administrative method, not proof that the statutory calculation is correct.
Divide eligible days worked by 20 where that rate applies, then apply the governing rounding rule. For example, 240 eligible days of actual work produce 12 days before any other adjustments. They do not produce 18 simply because a generic policy says so.
For an illustrative leave ledger, assume eligibility is satisfied, all figures use the correct accrual basis, and there are no disputed carry-forward restrictions:
| Ledger item | Days |
|---|---|
| Valid opening earned-leave balance | 8 |
| Leave earned from 240 eligible days of work | 12 |
| Earned leave already taken | −7 |
| Balance before year-end treatment | 13 |
Opening balance + leave earned − leave taken − leave already encashed = closing balance. Record adjustments separately so an employee can follow the calculation.
Use the applicable statutory joining-year rule and the company’s written allocation method. A simple “annual allowance divided by 12” calculation may describe a contractual benefit, but it does not replace a statutory service test.
Suppose a company voluntarily grants 24 annual days, credits them monthly, and gives a 1 July joiner six complete months of allocation. The contractual credit would be 24 × 6 ÷ 12 = 12 days. Label this as a company-policy example, not India’s legal formula.
Specify how joining midmonth, unpaid absence, transfers and partial days affect the balance. If the HR system uses an April–March financial year while the relevant rule uses a calendar year, maintain a reconciliation between the two. A change of software year should not silently erase accrued leave.
A sick leave policy should identify the applicable paid entitlement, explain how employees report illness, and set proportionate evidence requirements. It should also distinguish employer-paid leave from social-insurance sickness benefits.
No. The 70% figure commonly relates to ESIC sickness benefit for eligible insured persons. It is not a universal rate that every private employer can apply to sick leave.
The government’s explanation of ESIC sickness benefit describes the benefit at 70% of average daily wages, subject to contribution and benefit-period conditions. That is a distinct benefit route. State-law leave pay and any employer top-up require a separate assessment.
Before making a deduction, payroll should establish who pays, which entitlement applies, and whether overlapping payments are restricted. An ESIC registration number alone does not answer every one of those questions.
There is no single certificate rule for all Indian private companies. Follow the applicable law and a clearly communicated policy rather than importing a universal “certificate after three days” rule from another handbook.
For example, the Uttar Pradesh leave application rules allow an employer who doubts a sickness claim to request a registered medical practitioner’s certificate. Other legal provisions set their own evidence conditions.
A practical policy should allow the employee or a family member to notify the manager when illness prevents an immediate application. Give employees a way to submit evidence to HR without disclosing detailed medical information in a team chat. Explain the route for hospitalisation, recurring illness and absence beyond the available paid balance.
A sandwich policy cannot override an applicable rule excluding holidays from annual leave. The correct answer depends on the leave category and governing law, not simply on whether the handbook contains a sandwich clause.
For covered OSH annual leave, intervening and adjoining holidays are excluded. If Friday and Monday are working days and Saturday and Sunday are recognised non-working holidays, the annual-leave debit is two days in that example, not four.
Do not extend that example to every absence. A calendar-based maternity benefit period, unauthorised absence and ordinary annual leave are different situations. Show employees the relevant rule before applying a deduction.
The confusion is real: an employee discussion about Sunday deductions describes a policy charging a Sunday when leave was taken on either side. Such discussions help identify practical questions. Their comments are not legal authority.
An overseas headquarters calendar should not replace applicable Indian holiday entitlements. Build the employee’s local calendar first, then add company holidays or coordinate coverage for overseas clients.
Maharashtra illustrates the difference. Section 18 specifies eight paid festival holidays, including 26 January, 1 May, 15 August and 2 October, plus four agreed festivals. For covered work on those holidays, its provision requires double wages and a substitute day off. Compensatory leave is not automatically a substitute for every statutory pay obligation.
Publish the applicable calendar before the year begins. Identify which dates are mandatory, which are optional holidays, and how support teams will be staffed. A state-government office or bank holiday list is not, by itself, a complete private-company compliance assessment.
Unused leave must be treated according to its category and legal source. A company should not apply one year-end expiry rule to all earned, casual, sick and special leave balances.
Preserve the request, decision and reason, then apply the relevant refused-leave protection. A rejected request and an employee’s decision not to request leave are different facts.
The OSH provisions described earlier protect qualifying refused leave from the ordinary carry-forward cap. As an operating practice, keep that balance identifiable in the HR system. A generic “unused leave” total makes it difficult to apply the correct rule at year-end.
Managers should record a coverage reason and offer alternative dates where appropriate. HR should review repeated refusals before running any expiry process. Sending a December reminder to use leave does not resolve months of recorded rejection.
Start with the legally payable days and the applicable daily wage basis. Do not assume that basic salary divided by 30, gross salary divided by 26, or CTC divided by 30 is correct for every employee.
For illustration only, if payroll has established 10 payable days and a legally applicable daily rate of ₹2,000, the gross encashment is ₹20,000. The example explains multiplication, not how to select the wage components or divisor.
Under OSH Section 32, payment for covered workers who resign, are discharged or are dismissed is due before the second working day expires. Retirement and death have a different timeline of up to two months. Other employee categories require their applicable rule to be checked.
Keep the leave payout identifiable within the full and final settlement calculation. Different settlement components can have different deadlines. Do not postpone an amount merely because the company normally completes its entire exit process after 30 or 45 days.
They can affect administration and contractual benefits, but they do not automatically cancel a statutory entitlement. Assess eligibility and employment status before relying on a general exclusion in the handbook.
A blanket probation exclusion is unsafe wherever the employee already qualifies under the governing leave provision. Confirmation and statutory qualifying service are separate concepts.
Ask HR to identify the actual rule, the service completed and the reason for any restriction. An August 2026 employee query about probation and encashment shows why the distinction matters: a displayed balance and an unconfirmed employment status can coexist.
Keep the appointment letter, policy version, leave ledger and exit calculation. The ledger is important evidence, but an advance credit may still require lawful prorating. Neither “probation” nor a screenshot alone settles the payable amount.
Employees should not assume that unused leave automatically shortens their notice period. Leave approval, the last working day, notice obligations and encashment are separate decisions that should be documented.
The Haryana Section 14 text specifically distinguishes unused leave from notice before discharge, removal or dismissal. At resignation, review the applicable terms and protections rather than assuming a universal right to replace notice with PL.
Confirm any agreed leave during notice in writing. If the employer refuses the proposed dates, calculate the remaining entitlement and any payout separately. Genuine sickness during notice should still go through the appropriate sickness process.
No. A fixed-term employee remains an employee. A genuinely independent contractor works under a different legal relationship, while an agency-supplied worker may still have statutory employment protections.
The Labour Ministry’s OSH guidance expressly addresses contract workers and fixed-term employment. Do not interpret a temporary contract as a general exemption from leave rights.
Use Peorient’s employee versus contractor guide to frame the classification questions. The practical assessment should examine the real working arrangement, not just the heading on an invoice or agreement.
A complete policy needs separate treatment for maternity benefits, applicable state-specific entitlements, and additional company benefits. They should not all be deducted from the ordinary earned-leave balance.
Maternity benefits are a separate statutory category where coverage and eligibility apply. Private-sector paternity leave generally depends on the employer’s policy rather than a universal nationwide entitlement.
Under Chapter VI of the Social Security Code, the employer-paid childbirth framework generally provides up to 26 weeks for an eligible woman with fewer than two surviving children, and 12 weeks where she has two or more. The usual qualifying test is 80 days in the 12 months before expected delivery. The ESIC route requires its own eligibility assessment.
Do not compress maternity-related events into a single generic “parental leave” rule. For eligibility, payment and related absences, see maternity leave in India for private companies. For fathers and voluntary benefits, see paternity leave in India.
No. State-specific measures can create obligations even without a single nationwide private-sector entitlement.
The Karnataka High Court’s 15 April 2026 judgment reproduces the state policy providing one paid menstrual-leave day per month, up to 12 per year, for eligible women aged 18–52 in the specified registered establishments. The reproduced order includes permanent, contract and outsourced women, prohibits monthly carry-forward and does not require a medical certificate.
The court directed implementation of the existing policy. Employers should check the operative state order and any subsequent judicial directions when administering it. Do not label all menstrual leave discretionary or deduct it from a separate protected category without assessing the rule.
Define additional benefits clearly and distinguish them from statutory categories. A mental health condition may be relevant to sickness leave even if the employer has no benefit named “mental health day.”
For optional leave, specify the qualifying event, paid duration, application process and use window. For unpaid leave, explain approval, salary treatment and any effect on benefits or accrual that lawfully follows. Working from home is a work arrangement, not leave, if the employee is still expected to perform their job.
Use an India policy schedule supported by state-specific rules, then add any more generous global benefits. The headquarters’ leave terminology and holiday calendar should not determine the Indian employee’s legal entitlement.
Avoid importing a home-country handbook without mapping its categories, pay rules and conditions to the Indian employment arrangement. These are policy-design checks, not statements that home-country law automatically applies overseas.
| Headquarters | India policy question to resolve |
|---|---|
| United States | Does a pooled or unlimited PTO policy still track India statutory accrual, sickness rights and exit payouts? |
| United Kingdom | Does “annual leave including bank holidays” wrongly absorb the employee’s applicable Indian holidays? |
| Australia | Does the global personal or carer’s leave category preserve the Indian categories and their different conditions? |
| New Zealand | Are global annual-holiday and sick-leave rules being copied without checking Indian eligibility and accumulation? |
Where a global policy promises a better benefit, document how it applies to India employees. Do not advertise a global allowance during recruitment and quietly replace it with a lower local schedule after joining.
Assess the actual work location, employing establishment, contractual arrangement and relevant state coverage. An employee’s reporting manager or the overseas client’s address alone is not a sufficient answer.
Remote-work arrangements can raise more than one jurisdictional question. Record the approved work location and require HR review before a permanent interstate move. At transfer, reconcile existing balances and future accrual rather than resetting everything to zero.
For an employer of record arrangement, agree who approves leave operationally, who maintains the statutory ledger, who pays and who handles disputes. When comparing EOR providers in India, request a sample state leave schedule and an explanation of unused-leave liability. A headline monthly fee does not answer those questions.
A useful policy lets an employee understand what they can take and lets payroll reproduce the balance. Use a short core policy with local schedules instead of hiding state differences inside a long list of exceptions.
Include the following fields, with named owners for updates:
An employee ledger should show opening balance, additions, leave taken, rejected requests, encashment and closing balance. Test the records using an employee who joins midyear, one who changes states and one who exits with unused leave.
Use a clear minimum-protection clause, then attach the actual entitlements and operating rules. The following is a drafting starting point, not a completed policy for every establishment:
“Your leave entitlements are set out in the schedule applicable to your employment and work location. The company will provide all applicable statutory entitlements and any additional benefits expressly granted under your employment terms. HR will confirm your eligibility, accrual, holiday calendar, carry-forward and encashment rules. If this policy conflicts with an applicable legal requirement, the legal requirement will be followed. Emergency absences should be reported as soon as reasonably practicable.”
The schedule still needs real numbers, eligibility conditions and a calculation basis. A general promise to comply with law is useful, but it cannot substitute for correct payroll settings.
Request a written explanation identifying the applicable policy clause, legal basis and calculation. Start with the facts rather than arguing from an online all-India leave chart.
Send HR the dates, leave category, available balance, application and decision history, relevant payslip, and the correction requested. Ask whether the disagreement concerns eligibility, approval, payment rate or the number of days. Those are different problems.
If the issue remains unresolved, obtain advice on the appropriate state labour authority or legal route for the employment category. Keep supporting records and act promptly because claim procedures and time limits vary.
For employers, the next step is equally concrete: map every India employee to the right schedule, reconcile the balances, and resolve exceptions before the next payroll or year-end rollover. If you need help comparing employment partners for that work, discuss your India hiring plan with Peorient. Share the hiring states, team size and target start date.
Written by
Head of Cross-Border Tax and Compliance · 14+ years experience
Claire leads cross-border tax and compliance at Peorient. Previously at PwC Global Mobility Tax and Mercer, she specialises in permanent establishment risk, employer tax obligations, and co-employment tax implications. CTA, ACCA, CEBS, M.Sc. Taxation (LSE).
Understand leave policy in India, including earned, casual and sick leave, state rules, carry-forward, encashment and practical guidance for global employers.
