Is there a national minimum for earned leave in India?

No. Factory workers get one day per 20 days worked under the Factories Act. For office staff, the applicable state Shops and Establishments Act govern, most states mandate 12–15 days per year.

Can maternity leave be denied to contract employees?

No. Any woman employed directly or through an agency who has worked 80 days in the preceding 12 months is entitled to maternity benefit under the Act.

What is the maximum carry-forward for earned leave?

Typically, 30–45 days depending on the state and establishment type. Your policy must state the applicable cap clearly.

How to Create a Leave Policy for Your Company in India 2026

A leave policy is one of the first things employees read when they join a company and one of the first things they question when something goes wrong. If yours is vague, copied from a template, or simply out of date, you’re creating friction with employees and exposure with the law.

Here’s what a compliant leave policy in India must include in 2026 and how to build one that works in practice, not just on paper.

What the law says about leave in India

Leave entitlements in India are governed by a combination of central and state legislation. The primary laws are:

Factories Act, 1948 – applies to factory workers; mandates earned leave at one day for every 20 days worked
Shops and Establishments Acts – state-specific; covers most office and commercial employees; leave rules vary by state
Maternity Benefit Act, 1961 (amended 2017) – mandates 26 weeks of paid maternity leave for establishments with 10 or more employees
Payment of Gratuity Act – relevant to continuity of service calculations when leave without pay is involved

India’s new Labour Codes, once fully notified, will consolidate many of these provisions. Until then, state-specific shops and establishments rules remain the primary reference for most private sector employers.

The key point: there is no single national leave entitlement that applies uniformly across all establishments. Your policy must be reviewed against the specific act applicable to your industry and state.

Types of leave every Indian company policy should cover

Earned leave (also called privilege leave)

Earned leave is accrued based on days worked. Under most state shops and establishments acts, the minimum is one day of earned leave for every 20 days of work, though many companies offer more. Earned leave can generally be carried forward (subject to a cap) and encashed on exit.

Your policy must specify:

Accrual rate
Maximum carry-forward limit
Encashment rules (whether during service or only at exit)
Minimum advance notice required before taking earned leave

Sick leave

Sick leave covers absence due to illness or medical reasons. It is typically non-encashable and non-carry-forward. The standard under most state acts is 7 to 12 days per year, though employer practice often exceeds this. Your policy should specify whether a medical certificate is required and from what duration of absence.

Casual leave

Casual leave is for short, unplanned absences- personal errands, family obligations, unforeseen circumstances. It typically ranges from 6 to 12 days per year. It is generally not carry-forward and not encashable. Some companies merge casual and sick leave into a combined “personal leave” bank.

Maternity leave

Mandatory under the Maternity Benefit Act. For companies with 10 or more employees:

26 weeks of paid maternity leave for the first two children (24 weeks may be taken before the expected delivery date)
12 weeks for the third child onwards
12 weeks for mothers adopting a child below 3 months of age
Work-from-home facility post-maternity leave, if the nature of work permits, to be mutually agreed

Your policy must reflect these entitlements exactly. Offering less than what the Act mandates, even inadvertently, is a legal violation.

Paternity leave

There is no central law mandating paternity leave in India for private sector employees. However, many companies offer 3 to 15 days as a policy benefit. If your company offers it, document it clearly.

Public holidays

Specify the number of public holidays per year (typically 10 to 14, including national holidays and state-specific observances), how they are communicated, and whether optional/restricted holidays are offered.

Leave without pay (LWP)

Define when LWP is applicable, the approval process, and how it affects continuity of service for gratuity calculations.

What your leave policy document must include

A compliant and practical leave policy should cover:

Scope, which employees it applies to (full-time, part-time, contract, probationary)
Types of leave with entitlement for each
Accrual and carry-forward rules
Application and approval process
Notice requirements
Encashment rules
Impact of leave on probation periods
Maternity, paternity, and adoption leave provisions
Consequences of taking leave without approval

Common mistakes to avoid

Leaving state-specific rules out of scope is the most common error. A company headquartered in Maharashtra with employees in Karnataka and Tamil Nadu has different minimum obligations in each state. One policy document must either address each state’s requirements or link to state-specific addenda.

The second most common mistake is not updating the policy after the Maternity Benefit Amendment. Many companies are still running pre-2017 policies that only cover 12 weeks, which is now non-compliant.

Conclusion

A leave policy that’s legally compliant, clearly written, and actually accessible to employees removes a significant source of confusion and friction from your HR operations. The law sets the floor, your policy builds on it.

HRTailor.AI lets you generate a customised, legally grounded leave policy in minutes- factoring in your state, establishment type, and headcount. The Ask HR Tailor assistant can also answer specific leave-related queries with law-cited responses, so your HR team spends less time researching and more time managing.