Leave Policy and Holidays in India

“Explore India’s Leave Policy and Holidays, covering earned leave, casual leave, sick leave, maternity leave, and more. Get insights into statutory provisions under Factories Act and Shops & Establishments Act in different states. Understand the quantum of leave entitlement, carry-forward rules, leave encashment, and provisions for legal practitioners. Stay compliant with labor laws for a harmonious work environment in India. For detailed information, visit Prakasha & Co.’s comprehensive guide on Leave Policy and Holidays in India.”

The Factories Act, 1948 is applicable for factories in India. For establishments other than factories (such as IT/ service companies, shops, etc.), every state has enacted Shops & Commercial Establishments Act. These acts determine the provision regarding working hours, holidays and leaves of Indian workers and employees.

Types of Leaves in India

The types of leaves that are provided by the employers to the employees, and there are enactments that govern the minimum leaves that are to be provided by the employers. However, such leaves are not defined under any specific act but are understood on a general meaning that is accepted by mostly all of the factories or establishments working within the country.

The types of leaves and other terminology used in leave policies are –

• Earned leave / Privilege leave (EL/PL) – It is called so because one ‘earn’ these leaves by working on workdays. These are typically used for any personal reason such as vacation or wedding or to observe festivals which are not declared holidays. Days worked shall not include holidays, weekends or days on which the employee does not actually work.

Providing such leaves is mandatory as per labour laws, though the quantum of such leaves vary from one state to another. As per the Factories Act and Karnataka Shops & Establishments law, a minimum of one day for every 20 days worked is to be provided as earned leave. The employee is entitled for encashment of Earned leave / Privileged leave as per the respective state’s Shops and Establishments Act and Rule.

• Casual Leave (CL) – Some companies provide casual leave entitlement in addition to EL. The Casual Leave is granted for an unanticipated event or when an employee is unable to attend the office for a day or two due to any personal exigency. The quantum varies from state to state, as per Shops and Establishments Act. Normally companies restrict Casual leave to a short duration. Casual leave is normally not clubbed with other leave, but can be availed along with other leave in case of insufficient leave balance. Generally Casual leave is not cashable nor can it be carried.

This is not mandatory in Karnataka. However, other states may mandate the employer to provide casual leave as well. For example, as per the Kerala Shops & Establishments law, 12 days per annum casual leaves have to be provided.

• Sick leave (SL): An employee is entitled to avail Sick leave in case of sickness. During Sick leave, wages are paid to the employees when they are out of work due to illness. The number of sick leaves is fixed by the establishment in accordance with the provisions of the respective state’s Shops and Establishments Act. Sick leave accumulated in a year, may be carried forward and availed in the next year in certain states.

As these leaves are prone to misuse, employers usually seek a medical certificate in case the number of days of leave, at once, exceed two or three. As per Karnataka Shops & Establishments law, employers have to provide 12 days per annum sickness leave. Though there are no additional leaves (in addition to earned leaves) in the Factories Act, there are laws pertaining to compensation for accidents/ sickness caused during the course work.

• Maternity Leave/ Paternity Leave (ML) – Maternity benefit Act of 1961 requires that employers have to provide 26 weeks paid leave to any woman who has worked for at least 80 days in the 12 months preceding the date of expected delivery. However, there are no laws in India providing paternity leaves in India, but certain employers do provide paternity leaves as an additional benefit.

• Compensatory Off (Comp offs) – These leaves are provided to the employees if they are required to work on a weekend or a holiday due to the priority of deliverables, where the employee is granted compensatory off on any other workday. These are explicitly provided in the policies by employers, and there are no rules in specific about comp offs

Holidays – These are the leaves that are paid. There are following types of holidays in India:

• National Holiday –The state government under Industrial Establishment (National and Festival Holidays and Casual and Sick Leave) Act can declare national holiday for the factory workers within the state. For non-factory workers, national holidays are declared under Shops and Establishment Act adopted by the state. There are fixed national holidays in India, i.e. 26th of January, 15th of August, and 2nd of October every year.
• Weekly Holidays – Under Indian laws, maximum working hours a week for a worker has been prescribed and a worker cannot work for more than such prescribed hours. Weekly holiday is compulsory as per the Factories Act and Shops and Establishment Act. As per Factories Act, first day of the week i.e. Sunday shall be a weekly holiday and the employer has to make sure that no worker works more than 10 days without a rest day of 24 hours. Under Shops and Establishment Act, the employee shall be given a rest of 24 hours of rest in every week. 

There are either 1, 1.4 or 2 weekly holidays in the organizations at the end of the week for all the employees. As per the applicable law there is one weekly holiday that must be mandatorily given to the employees, but many organizations provides for more than 1 day weekly holiday depending upon their policy.

• Festival Holidays: Various religious and regional festivals also account for holidays in India. There are very few festivals like Christmas, which fall on the same date every year. However, the exact dates of some festivals depend on the lunar calendar and are subject to change. Each company has its own policy regarding how many festivals it will give a paid leave for, every year. State government also plays part in declaring festival holidays for factories and non-factory workers under factory and shops act. 

Carry forward of Earned leaves/ Privileged leaves (EL/PL)

Under Factories act, if a worker does not avail all of the leaves allowed to him in any one calendar year, the leave not taken by him shall be carried forward to the succeeding year. However, the total number of days of leave that may be carried forward shall not exceed 30y in the case of an adult or 40 in the case of a child. 

Similarly, a non-factory employee is entitled to take benefits of carrying forward his leaves as per the relevant provisions of the shops & establishment acts of the respective states. For example, under Delhi Shops act, an employee is entitled to carry forward his accumulated PLs to the succeeding year subject to a maximum of 3 times the period of pl to which he is entitled after every 12 months’ employment. However, casual leaves or sick leaves may not be carried forward.

Leave Encashment – 

There is no statutory or legal requirement for employers to offer leave encashment. There is no separate law on leave encashment, but a lot of companies offer such facility to its employees. Under Factory Act, there is no mention of leave encashment but Section 80 entitles a worker for wages at a rate equal to the daily average of his total full time earnings for the days on which he actually worked during the month immediately preceding the leave. 

Such wages shall be exclusive of any overtime wages for the purpose of calculating the wages for leave period but inclusive of dearness allowance and cash equivalent of regular advantages such as concessional food or other articles. An employee can take leave encashment while quitting services, superannuation, discharge, dismissal or death. In practice, leave encashment policy either forms part of the employment contract of a worker or is a part of the Human Resource (HR) Policy of an organization.

Maternity Leave

Maternity leave in India is a paid leave of absence from work that allows women employees the benefit of taking care of their newly born, and at the same time retain their jobs. The Maternity Benefit Act 1961 governs maternity leaves in India. The act extends to whole of India.

Application of Act – It applies to every establishment being a factory, mine or plantation including any such establishment belonging to Government and to every establishment wherein persons are employed for the exhibition of equestrian, acrobatic and other performances and to every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months.

Women shall be entitled to maternity benefit unless she has actually worked in an establishment for a period of not less than eighty days in the twelve months immediately preceding the date of her expected delivery.

Right to payment of maternity benefit — Subject to the provisions of this Act, every woman shall be entitled to the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence up to the maximum period of twenty-six weeks of which not more than eight weeks shall precede the date of her expected delivery. 

The maximum period entitled to maternity benefit by a woman having two or more than two surviving children shall be twelve weeks of which not more than six weeks shall precede the date of her expected delivery. If a woman dies during this period, the maternity benefit shall be payable only for the days up to and including the day of her death.

A woman who legally adopts a child below the age of three months or a commissioning mother shall be entitled to maternity benefit for a period of twelve weeks from the date the child is handed over to the adopting mother or the commissioning mother, as the case may be. 

LEAVE IN ESTABLISHMENTS COVERED UNDER THE FACTORIES ACT

Leaves as per Factories Act applies to all Management Staff, Executives, Supervisors, workers and contract workers as all of them fall under the definition of ‘worker’ under the Factories Act.

Type of Leave	Privileged / Earned	Casual	Sick
Quantum per year	1 day leave for every 20 days worked in the previous year (Eg. 300 days worked = 15 days leave)	Nil	Nil
Entitlement	On working 240 days in the first  previous year	NA	NA

Note –

1. If the Employee has quit or has been terminated, his earned leave balance should be paid to the employee and in case of death, to the nominee, within 2 days.

2. Any worker who has applied for leave and has not been granted the same, such refused leave shall be carried forward without any limit.

3. Leave can be calculated on Basic wages and DA.

4. Leave book & Leave Register are to be maintained for each worker

LEAVE IN ESTABLISHMENTS COVERED UNDER THE SHOPS AND ESTABLISHMENTS ACT

Employees are entitled to a certain number of days of leave per year aside from the holidays and days off. Generally three types of leave are mentioned under the Shops and Establishments Act i.e. Privilege leave, Sick leave and Casual leave. This varies from state to state. An organization can make its leave policy as per the provisions of the respective state’s Shops and Establishments Act. The said leave policy cannot be less beneficial than that mentioned by the respective state’s Shops and Establishments Act. Generally, the framework of the Act is similar throughout. However, the leave provision under the Act varies for every state.

 DELHI SHOPS AND ESTABLISHMENTS ACT, 1954

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	15 days and may be accumulated up to a maximum period of 45 days	12 days casual-cum-sick leave

 HARYANA SHOPS AND COMMERCIAL ESTABLISHMENTS ACT, 1958

Haryana State has adopted Punjab Shops and Establishments Act.

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	1 leave for every 20 days worked and may be accumulated up to a maximum period of 30 days	7 days	7 days

Haryana State has adopted Punjab Shops and Establishments Act.

MAHARASHTRA SHOPS AND ESTABLISHMENTS ACT, 1948

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	5 Days (for every 60 days worked) 18 Days (for every 240 days worked) and may be accumulated up to a maximum period of 45 days	8 days	Nil

TAMILNADU SHOPS AND ESTABLISHMENTS ACT, 1947

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	12 days and may be accumulated up to a maximum period of 45 days	12 days	12 days

 KARNATAKA SHOPS AND COMMERCIAL ESTABLISHMENTS ACT, 1961

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	20 days (1 leave for every 20 days for adults) and may be accumulated up to a maximum period of 30 days	NIL	12 days on Medical grounds

UTTAR PRADESH SHOPS AND ESTABLISHMENTS ACT, 1962

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	15 days after every 12 months continuous employment and may be accumulated up to a maximum period of 45 days	10 days	15 days

TELANGANA SHOPS AND ESTABLISHMENTS ACT, 1988

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	15 days for every completed year and may be accumulated up to a maximum period of 60 days	Nil	Nil

WEST BENGAL SHOPS AND ESTABLISHMENTS ACT, 1963

Type of Leave	Privileged Leave/ Earned Leave	Casual Leave	Sick Leave
Quantum per year	14 days for every completed year and may be accumulated up to a maximum period of 28 days	10 days	14 days in very year on half pay and may be accumulated up to a maximum period of 56 days

Exemption to Lawyers office –

As stated above Shops and establishment acts of respective states govern the provisions regarding non-factory establishment. Under the act, it also provides exemptions where the provisions of the Act will not be applicable. 

Out of the abovementioned state, in Delhi, the establishment of legal practitioners, Haryana, the office of lawyers and in Karnataka, the offices of legal practitioners in which not more than three persons are employed; are exempted from the provisions of act under section 3 of the applicable in respective states.