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.

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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 Privileged / Earned Casual Sick

Leave

Quantum 1 day leave for every 20 days worked in the previous year (Eg. 300 Nil Nil
per year days worked = 15 days leave)

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

HARYANA SHOPS AND COMMERCIAL ESTABLISHMENTS ACT, 1958

MAHARASHTRA SHOPS AND ESTABLISHMENTS ACT, 1948

Type of Privileged Leave/ Earned Leave Casual Sick
Leave Leave Leave

Quantum 5 Days (for every 60 days worked) 18 Days (for every 240 days 8 days Nil
per year worked) and may be accumulated up to a maximum period of 45 days