Employee Leave Policies in India

employee leave policy in india

How are effective leave policies, that are balanced, aid employee engagement and meet statutory compliance needs designed? In India, crafting these policies involves understanding the mandates laid down by various labour laws and incorporating flexibility that addresses employee well-being and organizational culture. A leave policy is a guaranteed and official acknowledgement of the number of leave an employee can avail.

The legal framework in India, including the Factories Act, 1948, the Shops and Establishments Act and other relevant provisions, sets minimum standards for paid leave, including casual, sick and earned leave. However, the most forward-thinking companies go beyond these basics to integrate more comprehensive and inclusive policies. These might include maternity and paternity leave, sabbaticals and leave for education or volunteering. By aligning these enhanced benefits with legal standards, organizations can foster a supportive workplace environment that values and motivates its employees.

Legal Requirements for Leave in India

1. Annual Leave:

Factories Act, 1948: Workers are entitled to annual leave with pay for 12 working days for every 12 months of work. The Act covers all workers who have worked at least 240 days in a year.

Shops and Establishments Acts: These acts are enacted by various state governments and the leave provisions can vary. Generally, employees are eligible for annual leave with wages at the rate of one day for every 20 days worked, applicable after completing 12 months of service.

2. Casual Leave and Sick Leave:

These are also governed by the respective state’s Shops and Establishments Acts. Typically, employees are entitled to a certain number of casual and sick leave days per year (usually 7 to 12 days for each type of leave). An employee cannot carry forward the unused paid leave to the next year if these leaves are not exhausted in the current year.

Casual leaves are usually determined by the company policy and it is the company’s perrogative as to decide the number of days an employee can take a casual leave. Casual leaves are paid leaves. It can range from half a day to 7 days or more in many companies. Under the Indian Shops and Establishment Act, a casual leave of 6 days is allowed for an employee.

3. Maternity Leave:

As per the Maternity Benefit (Amendment) Act 2017, women are entitled to 26 weeks (6 months) of maternity leave for the first two children and 12 weeks for subsequent children. The law applies to all establishments employing 10 or more people to women who have in the last 12 months put in at least 80 days (about 2 and a half months) of work.

4. Paternity Leave:

Paternity leave in India is not mandated by a central law but is offered by some companies as part of their leave policies.

5. Other Leaves:

Educational Leave, Bereavement Leave, Compensatory Off, Time off in lieu or TOIL, Loss of Pay Leave etc. are types of leaves that are not typically mandated by law but may be offered by employers as part of their specific leave policies.

The Role of Leave Policies in Employee Engagement

The role of leave policies in enhancing employee engagement is multifaceted and significant. Employee engagement, a critical driver of organizational success, is directly influenced by how valued and supported employees feel within their workplace. Leave policies are not merely a legal obligation but a strategic tool that companies can use to improve job satisfaction and reduce employee turnover. 

Moreover, in the evolving legal landscape, where amendments and updates to labour laws are frequent, organizations that proactively adapt and enhance their leave policies can better engage their workforce. For instance, the Maternity Benefit (Amendment) Act 2017, which increased maternity leave from 12 weeks to 26 weeks, was a significant step towards supporting working mothers, thereby promoting gender diversity and inclusivity in the workplace. Such enhancements not only help in retaining valuable talent but also in attracting new employees who value supportive and progressive workplace cultures. Implementing flexible leave policies that allow for unplanned personal needs or family emergencies can further enhance employee morale and loyalty. 

Best Practices in Formulating Leave Policies

Formulating effective leave policies requires a careful alignment with both statutory regulations and the specific needs of the workforce. Best practices in the development of these policies start with a thorough understanding of the applicable laws, such as the Factories Act, 1948, and the state-specific Shops and Establishments Acts. These laws provide the baseline requirements for various types of leaves, including minimum quotas for casual, sick, and earned leaves. 

It is imperative for organizations to ensure that their leave policies at least meet these legal standards to avoid penalties and ensure compliance. Best practices for formulating employee leave policies involve several key considerations that ensure compliance, fairness, and adaptability. Here’s a structured approach in point form:

Compliance with Legal Standards:

Ensure that leave policies meet or exceed the requirements set by national and state-specific legislation, such as the Factories Act, 1948, and Shops and Establishments Acts.

Clear Definition of Leave Types:

Explicitly define all types of leaves available, including casual, sick, earned, maternity, paternity, and any additional leave types like bereavement or sabbatical leaves. Specify eligibility criteria and conditions for each type of leave to avoid misinterpretation and ensure fair application.

Documentation and Procedure:

Establish clear, documented procedures for requesting and approving leave, including notice periods, required documentation, and the process for unforeseen or emergency leave requests. Also, define the process for handling disputes or grievances related to leave to ensure transparency.

Inclusivity and Flexibility:

Consider inclusivity in policy formulation to cover diverse employee needs, including provisions for disabilities, mental health issues, and cultural obligations.

Communication and Education:

Communicate leave policies clearly and effectively to all employees through multiple channels like employee handbooks, intranet, and staff meetings. Conduct training sessions for managers and HR personnel to ensure consistent policy enforcement and to handle leave requests fairly and legally.

Monitoring and Evaluation:

Implement a system to monitor leave patterns and usage to ensure the policy is being used as intended and is meeting employee needs without compromising organizational productivity. Regularly review and evaluate the effectiveness of the leave policy, taking into account employee feedback and changing legal or industry standards.

7th pay commission leave rules for Central government employees [ii]

Casual Leave – The central government employees get 8 days casual leave, whereas defence personnel gets nearly 20-30 days (about 4 and a half weeks) days casual leave, depending on the rank that they hold.

Earned Leave – Civilian employees get 30 days earned leave whereas defence personnel get nearly 60 days earned leave.

Maternity leave – The female employees get 180 days (about 6 months) of maternity leave and 45 days (about 1 and a half months) in case of abortion and miscarriage.

Sick leave – Defence personnel can avail this leave for 6 months and they will receive full pay and allowance during that time, after 6 months they can avail their full salary but not the allowance.


Crafting effective leave policies in India necessitates a delicate balance between statutory compliance and employee well-being. While legal frameworks like the Factories Act, 1948, and state-specific Shops and Establishments Acts provide minimum standards, progressive organizations extend beyond these to foster inclusive and supportive cultures. These policies play a pivotal role in enhancing employee engagement by demonstrating organizational support and valuing employee needs beyond mere legal obligations. 

Consulting legal experts is paramount for ensuring the legality of leave policies in India. While organizations strive to balance employee well-being with statutory compliance, the intricacies of labour laws and evolving regulations require expert guidance. We provide invaluable insights into interpreting and implementing complex legal frameworks, mitigating risks of non-compliance, and safeguarding against potential legal challenges. 


1. How many days of paid leave are provided for first-time mothers under the Maternity Benefit Act, 2017?

Under the Maternity Benefit Act, 2017, first-time mothers in India are entitled to 26 weeks (6 months) of paid maternity leave. This landmark legislation aims to support working mothers by providing them with adequate time to recover from childbirth, bond with their newborns, and transition back to the workplace. The Act applies to all establishments with 10 or more employees and mandates that women who have worked for at least 80 days in the preceding 12 months are eligible for maternity benefits.

2. How much sick leave can a defence personnel avail of under the 7th pay commission?

Under the 7th Pay Commission, defense personnel in India are eligible for sick leave for up to 6 months, during which they receive full pay and allowances. After the initial 6 months, they continue to receive their full salary but not the allowances. This provision ensures that defence personnel is adequately supported during periods of illness or medical treatment, allowing them the necessary time to recover without financial strain. 

3. Under the Factories Act, 1948 how many minimum days should an employee work so that he is eligible for earned leave?

Under the Factories Act, 1948, an employee becomes eligible for earned leave after working for a minimum of 240 days in a year. This provision ensures that employees accrue leave benefits based on their length of service, incentivizing consistent and productive work while also providing them with adequate time for rest and relaxation. Earned leave, also known as annual leave, is a crucial component of employee benefits, contributing to their overall well-being and work-life balance. 

4. What is the difference between casual leave and earned leave?

The primary difference between casual leave and earned leave lies in their nature and purpose within the realm of employee benefits. Casual leave, often referred to as short-term leave or unplanned leave, is typically granted for unforeseen personal reasons or emergencies. 

On the other hand, earned leave is accrued by employees based on their length of service or tenure with the organization. Unlike casual leave, earned leave is planned in advance and is meant to provide employees with scheduled periods of rest and relaxation. 

5. Under the Industrial Establishments (National and Festivals Holidays) Act, 1958, on which days it is compulsory to provide leave to the employees?

Under the Industrial Establishments (National and Festival Holidays) Act, 1958 in India, it is compulsory for employers to provide leave to employees on specific national and festival holidays. These holidays typically include important national events such as Independence Day, Republic Day, and Gandhi Jayanti, as well as major religious festivals such as Diwali, Eid, Christmas, and others recognized by the state or central government.

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