Leave Policy in India

What does paid leave in India look like?

To better understand paid leave in India, it is important to distinguish between the statutory categories used under Indian labor law. The terms “employee,” “worker,” “gig worker,” and “platform worker” have different legal meanings, and leave entitlements depend on the law that applies to the individual and the establishment. For annual leave under the Occupational Safety, Health and Working Conditions Code, 2020 (OSH&WC Code), the relevant statutory category is generally a “worker.”

Paid leave requirements can vary depending on the establishment, the worker or employee category, and the applicable state or Union Territory law. Employers should therefore review both the current central labor-law framework and the laws applicable in the jurisdiction where the employee works. Where a state law provides a more favorable benefit than the central framework, the more favorable benefit may continue to apply, as explained in the Ministry of Labour and Employment’s 2026 FAQs on the Labour Codes.

The same jurisdiction-specific approach applies to public and festival holidays. Employers should check the applicable state or Union Territory legislation and official holiday notifications rather than relying on a single nationwide minimum number of holidays for all private-sector employees.

For qualifying workers, the current central reference for annual leave is the OSH&WC Code, which came into force on November 21, 2025. The Code repealed the Factories Act, 1948, so the Factories Act should no longer be used as the principal current-law reference for these annual-leave rules. The repeal is set out in Section 143 of the OSH&WC Code.

Under Section 32 of the OSH&WC Code, a qualifying worker who has worked for at least 180 days in a calendar year is entitled to annual leave with wages. A worker generally earns one day of leave for every 20 days worked. An adolescent worker, as well as a worker employed below ground in a mine, earns one day of leave for every 15 days worked. These are accrual rates rather than fixed universal annual entitlements of 12, 15, or 20 days.

Periods of layoff, maternity leave, and annual leave are counted when determining whether the worker has met the 180-day eligibility threshold, although the worker does not earn additional annual leave for those periods. Holidays falling during, immediately before, or immediately after annual leave are excluded from the period of annual leave taken. A worker who joins after January 1 may also qualify for leave at the statutory accrual rate if they work at least one-fourth of the total number of days remaining in that calendar year.

Annual leave under the Code is leave with wages. Employers should calculate leave-related pay in accordance with the current statutory wage framework and any applicable rules rather than relying on the former Factories Act formula.

Unused annual leave may generally be carried forward to the following calendar year, subject to a maximum accumulation of 30 days. However, where a worker applied for leave with wages and the employer did not grant it, the refused leave may be carried forward without that 30-day limit. The Code also provides for leave encashment, including payment for leave standing to a worker’s credit when employment ends. These provisions are also addressed in the Ministry of Labour and Employment’s 2026 Labour Codes FAQs.

If a qualifying worker is discharged, dismissed, leaves employment, retires, or dies while in service, the OSH&WC Code provides for payment in lieu of the annual leave to which the worker was entitled immediately before the employment ended, subject to the applicable statutory provisions.

These statutory annual-leave provisions should not automatically be extended to independent contractors, freelancers, gig workers, or platform workers. Under the Code on Social Security, 2020, a “gig worker” is defined separately from a person working within a traditional employer-employee relationship. The Code provides a separate framework for social security schemes for gig and platform workers. These provisions do not, by themselves, create the same statutory annual-leave entitlement that Section 32 of the OSH&WC Code provides to qualifying workers.

Because paid leave in India can involve both central legislation and state or Union Territory requirements, employers should identify the laws that apply to the establishment, work location, and individual’s legal classification before setting or administering a leave policy. Where different statutory provisions apply, employers should also determine whether a more favorable employee benefit must be preserved.

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 also remembered 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.

What are the types of leave in India?

Earned leave or privileged leave

Earned or privilege leave entitlements depend on the law applicable to the employee and establishment. Under the Occupational Safety, Health and Working Conditions Code, 2020, an eligible worker who has worked at least 180 days in a calendar year is entitled to one day of paid annual leave for every 20 days worked. The Code also provides rules on carry-forward and leave encashment. Other employees may be subject to applicable state laws, service rules, or employment policies.

Casual leave

India does not have a single, uniform casual leave entitlement applicable to all employees. The number of casual leave days, limits on consecutive leave, and approval requirements depend on the applicable law, standing orders, and employer policy.

Sick leave

Employees covered by the Employees’ State Insurance scheme are generally subject to a wage ceiling of INR 21,000 per month, or INR 25,000 for persons with disabilities. Eligibility for ESI sickness benefit also depends on insurance coverage and contribution conditions; an insured person generally must have contributed for at least 78 days in the relevant six-month contribution period. Sick leave provided directly by an employer is not governed by one uniform India-wide entitlement and may vary according to applicable state law, standing orders, and employer policy. Rules on accumulation, medical certificates, and the number of leave days therefore should not be stated as uniform national requirements.

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 time off may arise under applicable law or employer policy when an employee works on a weekly rest day or holiday. Under the Occupational Safety, Health and Working Conditions Code, 2020, where a worker is deprived of a weekly holiday under an applicable exemption, the worker must receive an equal number of compensatory holidays within the same month or the following two months. It is therefore incorrect to state that compensatory leave will usually be less than the equivalent time lost.

Maternity leave

Under the Code on Social Security, 2020, an eligible woman who has worked for the employer for at least 80 days during the 12 months immediately preceding the expected delivery date may receive up to 26 weeks of maternity benefit. A woman with two or more surviving children is entitled to up to 12 weeks. A woman who legally adopts a child below three months of age or a commissioning mother is entitled to 12 weeks from the date the child is handed over to her.

The Code also provides six weeks of paid leave following a miscarriage or medical termination of pregnancy, two weeks following a tubectomy operation, and up to one additional month for illness arising from pregnancy, delivery, premature birth, miscarriage, or medical termination of pregnancy, subject to the applicable proof requirements. Where the nature of the work permits, the employer may allow the woman to work from home after maternity benefit for a mutually agreed period and on mutually agreed conditions.

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).

Compassionate leave

There is no uniform India-wide statutory minimum of five days of compassionate or bereavement leave for private-sector employees. Any entitlement and the definition of eligible family members depend on applicable law, service rules, employment terms, or employer policy.

Annual/Privilege leave

There is no uniform statutory minimum of 18 days of annual or privilege leave for all employees in India, and a mandatory accrual rate of 1.5 days per month should not be stated as a nationwide rule. Under the Occupational Safety, Health and Working Conditions Code, 2020, an eligible worker who has worked at least 180 days in a calendar year is entitled to one day of paid annual leave for every 20 days worked. Other leave entitlements and accrual methods may depend on the employee’s coverage, applicable state law, service rules, or a more favorable employer policy.

Hire in India with Skuad

Hiring in India means accounting for state-specific leave rules, statutory entitlements, payroll requirements, and different obligations for employees and contractors. Skuad supports global teams with employment contracts aligned with local labor laws across supported markets, statutory benefits and leave administration, payroll processing in 70+ currencies, and contractor onboarding from a single platform.

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FAQs

What is an employer of record in India?

An employer of record in India is a third party that becomes the legal employer of your workers while your company manages their daily work. It typically handles Indian employment contracts, payroll, salary TDS, and applicable EPF or ESI obligations without requiring your own local entity.

How much does an employer of record cost in India?

EOR pricing in India usually combines the employee’s gross salary, statutory employer costs, benefits, and a provider fee that may be fixed or percentage-based. Final cost depends on compensation, location, and eligibility for obligations such as EPF and ESI, so quotes should be reviewed in Indian rupees.

Can a foreign company hire employees in India without setting up an entity?

Foreign companies can typically hire employees in India through an EOR without incorporating an Indian subsidiary. The EOR signs the local employment agreement and usually manages payroll, salary tax withholding, and applicable social-security administration, while the client company directs the employee’s role, priorities, and day-to-day performance.

What compliance risks should employers consider when managing leave in India?

Employers should account for both national rules and state-specific Shops and Establishments requirements when managing leave in India. The four Labour Codes took effect on November 21, 2025, adding another compliance layer, so policies should be checked against the employee’s location, establishment type, and applicable statutory framework.

Is using an EOR better than setting up a legal entity in India?

Using an EOR in India is generally more practical for testing a market or hiring a small team, while establishing an entity may suit companies planning a substantial long-term presence. Entity setup also brings direct responsibility for Indian payroll, tax withholding, employment registrations, and state-level labour compliance.

How quickly can an EOR onboard an employee in India?

The timeline varies, but EOR onboarding in India can often move faster than forming a local entity because incorporation is not required before employment begins. Timing still depends on completed employment documents, payroll information, background checks where used, and any registrations needed for applicable EPF, ESI, or tax processes.