How to Structure Leave Policies Based on Location

Published 29 December 2025

The cleanest way to structure leave policies across locations is in two layers: one company-wide policy that fixes the leave categories, the leave year and the process for applying, approving and recording leave, plus a short schedule for each state or country that sets the entitlements and holidays required there. Standardise the process, localise the numbers, and make sure every location’s schedule meets at least its legal minimum.

This guide explains which rules apply in a multi-state Indian organisation, how to extend the same structure to other countries, the design choices you need to make, and the mistakes that cause trouble at audits and exits. If you need a refresher on the leave categories themselves, start with types of leave every company needs.

Why one leave number rarely works everywhere

Leave law is set locally. In India, labour is a concurrent subject, so central Codes and state laws apply together, and each state has its own shops and establishments law covering leave, weekly offs and holidays. Outside India the gaps widen: GOV.UK says most UK workers on a five-day week must receive at least 28 days’ paid annual leave, while in the US the federal Fair Labor Standards Act does not require paid vacation, leaving it to state law and employer policy.

A single blanket rule therefore either falls below the minimum somewhere, which is a compliance problem, or is set at the most generous location everywhere, which is a cost decision you should make deliberately rather than by accident.

The rules that apply in a multi-state Indian organisation

India’s four Labour Codes have been in force since 21 November 2025. For leave, the layers stack like this:

Layer	What it covers	Where to check
OSH Code, 2020 (central)	Annual leave with wages for workers, weekly holiday, working hours	Code text and the rules of the appropriate government
Code on Social Security, 2020 (central)	Maternity benefit, including 26 weeks for eligible women	Code text and rules
State shops and establishments law	Casual, sick and earned leave, weekly offs, opening hours for shops and offices	State labour department
State national and festival holiday laws	Number of paid holidays and how they are chosen	State labour department notifications
Your standing orders or service rules	Leave matters agreed or certified for larger establishments	Internal documents

What the OSH Code sets as the central baseline

Section 32 of the OSH Code gives workers in an establishment annual leave with wages on these terms:

Eligibility once the worker has worked 180 days or more in the calendar year.
One day of leave for every 20 days of work (different rates apply to adolescent workers and below-ground mine workers).
Someone joining after 1 January earns leave at the same rate if they work one-fourth of the remaining days in the year.
Unused leave carries forward up to 30 days. Leave the worker applied for and was refused carries forward without limit.
The worker can demand encashment at the end of the calendar year, and leave above the 30-day carry-forward can be encashed.
On discharge, dismissal or resignation, wages for leave due are payable before the end of the second working day.

Two scope points matter for policy design. The Code’s definition of “worker” excludes people employed mainly in a managerial or administrative capacity and supervisors above a notified wage level, so many companies still give these staff equal or better leave by policy for fairness. And an “establishment” under the Code generally means a place with ten or more workers. State laws may set different numbers for casual, sick or earned leave, so build each state schedule to meet whichever applicable rule gives the employee more.

Step by step: building the two-layer policy

Map your people to locations. List every office, site and remote employee and the establishment each one is attached to. Registration and state law follow the establishment, so this is the foundation.
Build an entitlement matrix. For each state or country, record the legal minimum for each leave type, the leave year, accrual method, carry-forward and encashment rules, and the holiday rules.
Write the core policy. Define leave categories, eligibility, how to apply, notice periods, approval levels, medical certificates, what happens on exit, and how leave is recorded. Keep numbers out of this layer.
Write one schedule per location. Each schedule lists the entitlements and holidays that apply there and names the law it relies on, with an effective date.
Choose a harmonisation approach. See the table below.
Align payroll. Encashment, leave without pay and exit settlements must use the same rules in payroll as in the policy.
Publish holiday calendars locally. Each location gets its own list for the year, issued before the year starts.
Set a review cycle. Review schedules each year and whenever a state notifies new rules or you open a new location.

Choosing a harmonisation approach

Approach	How it works	Trade-off
Local minimum	Each location gets exactly its legal floor	Lowest cost, but colleagues in the same team get different leave
Uniform top-up	One company number everywhere, at or above the highest local minimum	Simple and fair, but costs more and can exceed local norms
Hybrid	Common annual leave figure, local rules for holidays, sick and statutory leave	Balanced and the most common choice for growing teams

Extending the structure to other countries

The same two layers work internationally, with a few extra questions per country:

Is the leave year the calendar year, the financial year or the employee’s anniversary?
Can public holidays be counted within annual leave? In the UK, for example, employers can include bank holidays in statutory leave.
How is leave pay calculated, especially for variable pay or overtime?
What happens to untaken leave at exit, and is payment in lieu allowed during employment?
Which parental, family and sick leave is paid by the employer, and which by the state?

Keep a named owner and a source link for every country schedule. For how employers keep this current, see how HR keeps up with employment laws across different countries.

Remote and relocating employees

Location gets harder when people move. Decide in advance:

Remote staff in another state: record which establishment each person is attached to, and check whether working from home in another state brings that state’s law into play. Take advice where the answer is unclear. Our guide to work from home rules for hybrid teams covers the wider policy.
Transfers mid-year: state how balances move. A common approach is to carry the earned balance across and accrue at the new location’s rate from the transfer date.
Employees working from another country: local employment law, tax and social security may apply once someone works there, so treat cross-border remote work as a separate approval, not a leave question.

Example: what a location schedule looks like

Example (hypothetical structure; fill in figures from the law that applies at each location):

Item	Location A (state office)	Location B (factory)	Location C (overseas)
Governing law	State shops and establishments law, OSH Code	OSH Code, state factory rules	Host country law
Annual or earned leave	[days, accrual rule]	[days, accrual rule]	[days, accrual rule]
Casual and sick leave	[as per state law or policy]	[as per state law or policy]	[as per local law]
Paid holidays	[state holiday list]	[state holiday list]	[local public holidays]
Carry-forward and encashment	[rule]	[rule]	[rule]
Effective date and owner	[date, name]	[date, name]	[date, name]

Common mistakes to avoid

Copying another state’s policy without checking the local law.
Forgetting to add a new location’s schedule when you open an office or hire remotely.
Keeping leave balances in one system and encashment rules in another, so exits are paid wrongly.
Letting managers approve exceptions verbally, which creates unequal treatment.
Not keeping leave records. Registers can be kept in physical or electronic form, so a reliable digital record is enough if it is complete.

Leave rules connect closely to attendance, so align this policy with your time and attendance policy. For an India-only walkthrough, read how to create a leave policy for your company in India. To produce a first draft quickly, the HRTailor.AI HR Policy Generator lets you choose a leave policy and set your country and company size, then edit the draft to match your location schedules.

Last reviewed: 26 October 2026. General information, not legal or tax advice.

Official sources

Frequently Asked Questions

If an employee works from home in a different state, will their leave policy change?

It can. State leave laws generally apply through the establishment an employee is attached to, so check which establishment a home-based employee belongs to and whether working from another state brings that state’s law into play. Take advice where it is unclear.

What happens if an employee frequently changes their work location?

Record which establishment the employee is attached to at each point, apply that location’s schedule, and set a clear rule for moving leave balances when someone transfers.

What if the company office is in another state?

State laws apply to establishments in that state, so an employee attached to an office in another state may fall under that state’s rules. Map each employee to an establishment and check the applicable state law.

How to Structure Leave Policies Based on Location

Why one leave number rarely works everywhere

The rules that apply in a multi-state Indian organisation

What the OSH Code sets as the central baseline