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Leave Policy for Employers or Managers in India

An employee's right to take various types of leave is governed by rules and specifications in a written leave policy. What about the leave policies for employers and managers

A leave policy is a written statement of the guidelines and requirements pertaining to the various sorts of absences that an employee may take. 

A leave policy outlines the numerous categories of absences for different reasons, such as vacation, illness, maternity, mourning, etc. It outlines the regulations for several things, including the awarding of absence, eligibility, availing, and encashment. 

Through language, tone, and warmth, the leave policy conveys the professionalism and culture of the business.

The Need for a Policy on Leave

Employees have a legal right to time off, and companies are required by law to provide it. 

The business of selling leaves in India is governed by the Factories Act and state-level Shops and Commercial Establishment Acts. 

There is a lot going on in employees’ and their families’ lives outside of work. An employee must take time off from work due to life events such as birth, death, illness, or the care of a loved one. 

Additionally, taking time off is necessary for employees to handle personal things including family events, banking, and other obligations. Additionally, workers require some leisure time for travel and holidays so they may rest up and come back to their jobs with renewed vigour.

Paid leaves enable workers to receive assistance when they need it without worrying about losing their income. Employees who receive paid time off can relax and re-energize. A flexible leave policy increases job satisfaction, loyalty, and productivity, according to research. 

The company’s professionalism can be seen by having a clear leave policy and consistently enforcing it. You build employee happiness and confidence by establishing clear norms and transparency. You can develop a great employer brand by doing all of these things.

The Structure of a Leave Policy

You must make choices about the following issues when developing a leave policy: 

The many leave options available to employees, the rules and guidelines governing each type of leave

  • Your weekend policy, 
  • Public holidays for the year. 
  • In accordance with the relevant statutes, employees are given paid time off in addition to public holidays. 

Employees have the option of taking an unpaid vacation after using up all of their paid time off.

Leave Types

Besides public holidays, organizations offer the following sorts of leave: 

  • Paid time off (EL, also called privilege leave PL) 
  • Sick time (SL) 
  • Unpaid leave (CL) 
  • Payless leave (LWP) 
  • Parental leave (ML) 
  • father’s leave 
  • Off Compensatory 

Aside from the EL and SL leave kinds that are required by labour legislation, the organization determines the leave types.

At the other end of the spectrum, some companies only permit the number of days of leave needed to comply with the law. 

On the other extreme, some businesses may only have a single policy that reads, “Take leave whenever you need it!”

Rule of Leave 

You must establish different rules for each form of leave after you have determined the types of leaves an employee is eligible to take. 

  • Grant/entitlement: Amount, frequency, and timing of leave to be awarded. 
  • Rules for using leaves: how frequently an employee may use a leave, any restrictions, etc. 
  • Qualifications: who qualifies for this kind of leave.
  • Who has the authority to approve and what are the restrictions on approval.
  • Guidelines for clubbing and covering during intervening weekends or holidays. 
  • Cashing out includes determining what kinds of leaves are eligible, any restrictions, and the parts of a salary that can be cashed out.
  • Year-end activities include carrying forward lapsed leaves up to a certain limit.

Additional paperwork must be kept for leaves of absence such as sick leave and maternity leave. HR is responsible for making sure all papers are accessible. 

The different choices to also be made while designing the policy rely on the specific requirements and cultural context.

Guidelines for Taking Leaves 

Regarding grant rules, you should take into account the following: 

  • Amount of annual leave to be granted 
  • Period of time (monthly, quarterly, or annually) during which the leave is granted 
  • eligibility for grants 
  • additional leave awards 
  • Prorating

Number of Leaves 

The state government’s regulations must be followed for leave categories such as annual leave (AL/PL), sick leave, and others. For instance, the government in Karnataka requires that 18 days of paid leave be given each year. Additionally, it requires that 12 days of sick time be given annually.

For other leave categories, however, it is up to the organization to choose how many leaves to offer. For instance, if the organization has a policy on marriage leave, they may provide leave for a period ranging from 3 to 15 days.

Periodicity and Frequency of Grant 

Employees are eligible to request leaves of absence on a monthly, quarterly, half-yearly, or annual basis. Monthly or yearly grants are the most popular. 

Every sort of award has advantages and disadvantages. Employees are able to use annual leave at any time during the year when it is issued to them in one lump sum at the beginning of the year. For instance, if an employee is given 18 days of leave in January, they can enjoy a 2-week vacation in April. But with monthly payouts, the worker would only have accrued 6 days of vacation time by April, leaving them with insufficient balance. You can permit employees to take more leaves than they are entitled to in this circumstance.

Expiry Date 

For each form of leave, the expiry term may be different. Once more, the government regulations for specific leave categories require this. 

A limited amount of unused annual leave (also known as earned leave) can be carried over to the next year. For instance, the government in Karnataka requires that 30 days be carried forward. Earned vacation days that can’t be carried forward are either cashed in or expire. 

Other sorts of leaves, such as sick leave or casual leave, cannot be carried over to the next year or cashed in. At the conclusion of each year, the remaining leave balances expire.

A leave of absence given as compensation for working on a non-working day typically has a very short expiration period, ranging from 3 to 8 weeks.

Use Vakilsearch’s take home HRA Calculator to calculate your in-hand salary. The salary breakup calculator will help determine your exact take home salary.

Grant Qualification 

Grants for several forms of leave are subject to conditions. For instance, a type of leave like marriage leave might only be given once throughout the course of employment. Some additional leave options might only be available to women or based on an employee’s status.

Booster Grants 

The corporation reserves the right to give workers additional leaves at its own discretion. These grants are not automated or determined by the policy; rather, the management makes individual case-by-case decisions.

Dividing up the Leaves 

A pro rata policy is also required for new hires who join the company during the year for leave balances which are provided annually at the beginning of the leave period. 

Say a company offers 18 days of annual leave each year in January. One shouldn’t be given 18 days of leave when they join the company on July 1; instead, they should only be given 9 days. 

Pro-rata leave is issued depending on the ratio of the number of days that qualify as work in a given year to all days.

Both the joining date and the confirmation date may be used for the proration of the grant. 

You wind up with odd-looking fractional leave days as a mathematical result of prorating. What does it imply, for instance, that there are 1.398 days left on your leave? As a result, you would need a strategy to round these leave days off to the next full or half day. 

Elaborate regulations on how to prorate awards and the round-off rationale to be employed are an alternative to simple pro-rata policies which wind up being liberal in the amount of leave granted by companies. 

Less complex policies that do not grant employees an unfair advantage are preferred to those that are complicated and difficult to apply.

Rule of Eligibility 

Not every employee is qualified for every sort of leave. For instance, paternity leave is just intended for fathers, and maternity leave is only intended for women. To qualify for a particular form of leave, an employee must meet a number of requirements. 

  • a predetermined waiting period starting on the day you joined 
  • Prevent taking one type of leave concurrently with another type of leave. For instance, taking both an annual leave and a sick leave might be prohibited. 
  • Only permit if the remaining balance of a different leave type is zero. 
  • Limit the range of possible genders, marital situations, employment situations, etc.


The process of requesting leaves, instead of the types and quantity of breaks, impacts how “friendly” the leave policy is seen by the workforce. 

It’s important to keep in mind that a well-written HR policy can be used to convey the company’s values and expectations. The purpose of a leave policy is to help employees understand their rights as well as to make it simple for them to take advantage of those rights. 

The results that a successful leave policy generates—happy, engaged workers with a healthy work-life balance—are what matter most.

For further assistance regarding Leave Policy for Employers/ Managers in India, Contact our legal experts at Vakilsearch.

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