Leave Policy in India

Leave Policy in India
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Leave policy in India is complicated. There are separate rules that apply to specific states, even up to which holidays to honor as paid. Indeed, in addition to national and state holidays, employers in some regions provide additional local holidays that vary from region to region and from organization to organization depending on their agreement terms with employees. In most cases, these are aimed at helping employees gain more time off, but they also add complexity for many employers.

As another complication, leave policy in India will likely be affected by upcoming regulatory changes.

In 2020, the government of India passed legislation to unify 25 labor laws into three codes: the Social Security Code; the Code on Industrial Relations; and the Code on Occupational Safety, Health and Working Conditions. These joined the Wages Code that had been introduced in 2019.

Due to increasing COVID-19 cases and potential costs enterprises may incur per employee under these new codes, effective implementation has been deferred until a later date. As such, rules have yet to be notified by both central and state governments. Once in place, however, applicable legal provisions will take effect immediately upon notification being issued by an authorized body or institution.

It is expected that the new regulatory changes will take effect during the fiscal year 2023. In the meantime, the complicated old rules stay in effect regarding paid leaves.

Paid Leave in India

To better understand paid leave, It is important to clarify a distinction in employee classification in India. "Employees" in India are individuals performing work of any kind. Employees in the manufacturing industry, however, are classified as "workers" and are covered by specific legislation. Collectively, employees are referred to as "workmen," with non-workmen including gig and platform workers as well as people in administrative, managerial, or supervisory capacities.

The amount of paid leave given to employees in any company is contingent upon the state of residence. Each Indian state has its own policies related to holiday entitlements and rules. That's why businesses need to become familiar with local regulations before establishing vacation protocols.

A firm's policy cannot be less generous than what is laid out by the State Shop and Establishment Act for that specific Indian state. Generally speaking, common provisions across all states mandate at least seven fixed holidays devoted to national festivals or anniversaries such as Republic Day, Independence Day, and Mahatma Gandhi’s birthday. Employers have autonomy to decide on further recognized events or festivities throughout the year.

Because each Indian state has slightly different regulations, one of the country's primary labor laws governing wages and hours would make for a good example. The Factories Act dictates paid leaves and requirements for workers (i.e., employees in the manufacturing industry), specifically.

The Factories Act mandates that all workers who have worked a minimum of 240 days over the course of a year are eligible for 12 working days’ worth of annual leave. Adult employees earn one day off per every 20-day period, while young personnel (under the age of 15) acquire an additional five days, affording them one leisure day from each 15-day stint. Ultimately, adult and young workers receive, respectively, 15 and 20 working days’ vacation entitlement annually.

Workers in India are entitled to receive their usual daily wage rate during earned leave days. During annual leave, they receive their full daily wages. This includes dearness allowance (to mitigate inflation) and the cash value of items sold at a discounted price, such as food grains or other products. However, any overtime or bonus payments do not factor into this calculation.

If a worker wishes to take four or more days off at once, their salary for this time period must be paid prior to the start of the leave. However, annual leave can only be taken in whole or partial increments after providing written notice at least 15 days ahead. If nothing conflicts with established arrangements, then such requests may not be refused. Yearly leave must be divided into no more than three sections in any given year.

Employees can carry over annual leave up to a maximum of 30 days. However, any remaining days must be used in the current year. If an employee's contract terminates before they have taken their allotted annual leave, compensation for those unused holidays is calculated based on the number of months and hours worked during their employment period.

Again, the Factories Act covers "workers" specifically and does not extend to employees outside the manufacturing industry, but it's a decent uniform reference to understand what to expect when it comes to paid leaves. Though this regulation does not currently extend to independent contractors of the platform economy like freelancers or gig workers, they may still receive similar benefits through expansive interpretations of the law granted by the judicial authority.

Still, the last word is to strictly follow guidelines for the specific Indian state in which you want to hire employees.

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Public Holidays

India celebrates three major national holidays:

  • Republic Day (January 26) marks the adoption of India’s constitution in 1950, symbolizing their formal transition from colonial rule to independence.
  • National Day (August 15), called Independence Day, celebrates freedom being granted from British rule and the division of India and Pakistan in 1947; ceremonies include raising flags, marching drills, and singing India's national anthem.
  • Gandhi Jayanti (October 2) is held to salute Mohandas Karamchand Gandhi — better known as Mahatma Gandhi — for his leadership during their fight against British occupation post-independence occurring in August 1947.

In addition to these public holidays are those applicable only regionally or governmentally. Employees may enjoy eight to 12 days off annually if these are factored in, depending on an individual agreement or their employer's policy. Over 30 festivals can be celebrated per year across various religious denominations.

Types of Leave in India

Below are the types of leaves in India:

Earned Leave or Privileged Leave

Employees may earn privileged leave when they remain with an organization for a specific period. For example, some companies offer one leave per 23 working days. This type of leave can be taken by staff without deductions to their salary and with management approval (except in case of emergency). This leave can also be cashed out if desired.

Casual Leave

Casual leave in India is intended for brief periods of rest and requires prior approval from the management. Employees typically have access to three to seven consecutive days of casual leave, although this can vary across employers and industries.

Sick Leave

Employees in India who make less than 21,000 INR per month may be eligible to receive sickness or disability benefits through the Employees’ State Insurance Act. Generally speaking, casual and sick leave policies in India range between five and 12 days each year. It is important to note that these leaves cannot usually be accumulated into upcoming years. Moreover, employers might expect proof of illness if an employee needs a longer leave period than what is customary; this typically involves providing a medical certificate.

State governments can establish individual annual leave policies (which may include both casual and sick leave) ranging from one day for every 20 days worked to 15 total vacation days annually throughout the calendar year — which can also often be taken in no more than three portions within the said time frame.

Leave Without Pay

When an employee has used all their allotted leaves but still requires more days off, the additional time away from work can cause a salary reduction. This is known as "leave without pay." If applicable, employees may be able to apply this leave toward future absences allowed by the leave policy.

Compensatory Off

Compensatory leave or "comp-offs" is a type of leave awarded to employees who work during holidays. Although the exact number of extra days may vary from company to company, it will usually be less than the equivalent time worked. Consequently, this provides vital flexibility for workers and employers alike.

Maternity Leave

Maternity leave in India was recently amended. In 2017, amendments were made to the Maternity Benefit Act that increased the paid maternity leave for a woman's first two children from 12 to 26 weeks provided that she had worked with her employer for at least 80 days. For additional births and other scenarios such as surrogacy and adoption, employees are eligible to receive 12 weeks of paid leave.

Additionally, female staff members may also take extra time off due to miscarriages, medical terminations, or premature birth of a child, as outlined in the act. Furthermore, there is the benefit of childcare included in these allowances along with options permitting female employees to continue working remotely after their pregnancy leaves have expired.

Paternity Leave

Paternity leave in India is not formally recognized in labor laws but is rising in prevalence. Central government employees may gain access to 15 days of paid time off after the birth of a child. Several extensive private sector organizations are offering paternity leave as part of their employment contracts. Paid parental leave in India is offered as an incentive to attract and retain talent in an intensely competitive job market.

Marriage Leave

Marriage leave is not statutory in India, and most companies grant their employees between one and 15 days of leave for this purpose. Usually, employers allot three days off for marriage. This type of leave may be used only once in an individual's tenure with a company (generally allowing the privilege exclusively for first marriages).

Bereavement Leave

Bereavement leave offers employees the time to attend last rites, manage personal matters, and process grief when there is a death in their family. Company policy typically grants between two and 20 days of leave for this purpose.

Hire in India Today

Expanding your business to India doesn't have to be an overwhelming task. Skuad offers an employer of record platform to streamline the process. Our platform helps companies hire contractors and full-time employees, manage payroll, and remain compliant with regional employment laws — allowing them to quickly establish a presence in the Indian market.

If you'd like to learn more about Skuad and the services we provide, book a demo with us today.

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