Leave Policy for Private Companies in India (2026): Leave Types, Labour Law and a Sample Policy
What the law generally requires, the leave types most private companies offer, a sample leave policy you can adapt, and the rules to settle — carry-forward, encashment and sandwich leave.
Every company needs a leave policy, but in many small and mid-size Indian businesses it exists only as "ask the boss". That works until two employees get different answers, someone disputes their balance, or a labour inspector asks for your leave records. A clear written leave policy protects both the company and its employees — and makes leave management far easier.
This guide explains what the law generally requires, the leave types most private companies in India offer, a sample policy you can adapt, common rules like carry-forward and sandwich leave, and how to manage it all without spreadsheets.
General guidance as of 30 September 2026, not legal advice. Leave entitlements depend on your state's shops and establishments law, the OSH Code and other applicable laws. Check the rules for your state and establishment.
The short answer
- Leave entitlements for private companies come mainly from your state's shops and establishments law (for shops and offices) and the OSH Code (for factories and other covered establishments), plus maternity benefit law.
- Most companies offer casual leave, sick leave, earned or privilege leave, public holidays, and maternity leave; many also offer paternity and bereavement leave.
- A common structure for a small private company is 8–12 casual days, 6–12 sick days and 12–18 earned days a year, plus holidays.
- Your policy should cover entitlement, accrual, approval, carry-forward, encashment, half days, sandwich rules and loss of pay.
- Put it in writing, share it with every employee, and apply it consistently.
What the law generally requires
| Area | General position |
|---|---|
| Earned / annual leave | Under the OSH Code, workers generally earn 1 day of annual leave for every 20 days worked, after 180 days of work in the year; state shops and establishments laws set their own entitlements |
| Casual and sick leave | Set by state shops and establishments laws; commonly a few days of each per year |
| National and festival holidays | Set by state laws; typically three national holidays plus several festival holidays |
| Maternity leave | 26 weeks for the first two children (12 weeks from the third), under maternity benefit law |
| Carry-forward and encashment | Annual leave can generally be carried forward up to a limit; unused leave is encashable in many cases |
| Records | Leave records must be maintained; electronic records are accepted |
Because entitlements vary by state, start from your state's law and add company benefits on top.
Common leave types
| Leave type | Typical entitlement in private companies | Notes |
|---|---|---|
| Casual leave (CL) | 6–12 days | Short, planned or unplanned absences; usually no carry-forward |
| Sick leave (SL) | 6–12 days | Medical certificate beyond 2–3 consecutive days |
| Earned / privilege leave (EL/PL) | 12–18 days | Accrues monthly; carry-forward and encashment allowed |
| Public holidays | 8–12 days | National + festival holidays, as per state law |
| Optional / restricted holidays | 1–3 days | Employee picks from a list |
| Maternity leave | 26 weeks | For eligible employees |
| Paternity leave | 3–10 days | Not mandatory for most private companies; increasingly common |
| Bereavement leave | 2–5 days | Company benefit |
| Comp off | As earned | For working on a weekly off or holiday |
| Leave without pay (LOP) | As approved | When paid leave is exhausted |
A sample leave policy
1. Scope. This policy applies to all permanent employees. Probationers and fixed-term employees are covered as stated below.
2. Leave year. January to December (or April to March).
3. Entitlement.
- Casual leave: 12 days a year, credited at the start of the year (prorated for joiners).
- Sick leave: 12 days a year.
- Earned leave: 15 days a year, accrued at 1.25 days per month.
- Holidays: as per the annual holiday list.
4. Probation. Employees on probation may take casual and sick leave. Earned leave accrues from joining but can be used after probation. Optional holidays apply after probation.
5. Applying for leave.
- Planned leave: apply at least 3 working days in advance.
- Unplanned leave: inform your manager by 10 a.m. and apply on return.
- All leave must be applied for and approved in the HR system.
6. Half days. Casual, sick and earned leave may be taken as half days (first or second half).
7. Sick leave. A medical certificate is required for more than 2 consecutive days.
8. Carry-forward. Unused earned leave may be carried forward up to 30 days. Casual and sick leave lapse at year-end.
9. Encashment. Earned leave above the carry-forward limit, and at exit, is encashed at (basic + DA) ÷ 26 per day.
10. Sandwich rule. If leave is taken on both sides of a weekly off or holiday, the weekly off or holiday in between (is / is not) counted as leave. (Choose one and apply it consistently.)
11. Leave without pay. Absence without approved leave, or leave beyond the balance, is treated as leave without pay and deducted from salary.
12. Comp off. Employees who work on a weekly off or holiday with approval earn one comp off day, to be used within 60 days.
13. Maternity and paternity. As per law and company policy.
14. Records. Leave balances and history are available to each employee in the HR system.
Common questions to settle in your policy
- Sandwich leave: do weekly offs between leave days count? Many companies say yes for long leaves; others say no. Decide and write it down.
- Negative balance: can employees go below zero? Usually no — excess becomes leave without pay.
- Leave during notice period: allowed or restricted?
- Joiners: prorate entitlements by joining month.
- Unauthorised absence: how many days before disciplinary action?
Common leave management mistakes
- No written policy.
- Balances in a spreadsheet that nobody updates.
- Verbal approvals with no record.
- Inconsistent treatment of similar requests.
- Leave not linked to payroll, so leave without pay is missed or double-deducted.
- Ignoring state law minimums.
Managing leave without spreadsheets
In HR software:
- Employees apply on their phones; managers approve in one tap.
- Balances update automatically.
- Approved leave shows in attendance.
- Leave without pay flows into payroll.
How PeopleVio handles leave:
- Casual, sick and paid leave with annual quotas per company.
- Half-day leave (first or second half).
- Manager approvals with a request timeline.
- Probation rule for optional holidays.
- Holiday calendar and weekly offs.
- Comp off for extra days worked.
- Balances visible to employees; approved leave appears in attendance and payroll.
What PeopleVio doesn't do today: automatic carry-forward, leave encashment calculation, sandwich-rule enforcement, monthly accrual, or custom leave types beyond casual, sick and paid. Handle those in your policy, and add encashment as a payroll component.
| Active employees | Monthly billing | Yearly billing (per month) |
|---|---|---|
| 20 | ₹1,180 | ₹980 |
| 50 | ₹2,450 | ₹2,050 |
| 100 | ₹4,900 | ₹4,100 |
Prices exclude GST; leave, attendance, payroll, PF, ESI and TDS included. See the pricing page.
Frequently asked questions
How many leaves are given in a private company in India? Commonly 8–12 casual days, 6–12 sick days and 12–18 earned days a year, plus 8–12 holidays. Your state's law sets the minimum.
What is the leave policy as per labour law in India? It depends on your state's shops and establishments law and, for factories and covered establishments, the OSH Code. Under the OSH Code, workers generally earn one day of annual leave for every 20 days worked.
What is sandwich leave? When weekly offs or holidays fall between leave days and are counted as leave. Whether it applies is a company policy decision.
Can earned leave be carried forward? Usually yes, up to a limit set by law or policy. Casual and sick leave generally lapse at year-end.
How is leave encashment calculated? Commonly (basic + DA) ÷ 26 × days encashed. Follow your policy and applicable law.
The bottom line
A clear leave policy prevents most leave disputes. Start from your state's law, add the benefits you want to offer, write it down, and manage it in a system where balances, approvals and payroll stay in sync.
See PeopleVio's pricing or book a demo.
Related reading: Best leave management software in India · Leave management software price · Full and final settlement · HR compliance checklist
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