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HR glossary

What is Leave Carry Forward? Meaning and Example

Leave carry forward is the transfer of unused leave from one leave year to the next, so the employee can still use it later. Companies usually allow it only for certain leave types, such as earned leave, and only up to a cap. Anything above the cap lapses or is encashed, as the policy says.

How carry forward works at year end

At the end of the leave year, HR runs a year-end process. For each employee and leave type, it compares the unused balance with the carry-forward limit. The amount up to the limit moves into the new year as an opening balance. The rest lapses, or is encashed where the policy allows. Casual leave usually does not carry forward at all, sick leave often carries forward to a larger cap, and earned leave carries forward up to its own cap.

The legal cap for workers' annual leave

For workers' annual leave with wages under the OSH Code, no more than 30 days can be carried forward, and the worker may ask for unused leave to be encashed at the end of the year. Company policies set their own caps for other leave types and other staff, and should state them clearly along with what happens to the excess. The leave entitlement rules explain the worker entitlement in more detail.

Running year end without surprises

Most year-end complaints come from employees who did not know leave was about to lapse. In ZeniaHR, year-end carry forward runs up to the cap with the rest lapsing, and HR can preview the result for everyone before running it.

Example: Rekha Menon, a purchase officer at a Kochi hotel, had 38 days of unused earned leave on 31 December 2025. The hotel allows up to 30 days to be carried forward, so her opening EL balance on 1 January 2026 was 30 days. The other 8 days could not be carried forward. Under the hotel's policy she chose to encash them, and HR added the amount to her January 2026 payroll.

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Frequently asked questions

How many leaves can be carried forward to next year?

It depends on the leave type and the policy. Earned leave is usually carried forward up to a cap set by the company; for workers' annual leave under the OSH Code, the cap is 30 days. Casual leave usually cannot be carried forward, and sick leave often has its own accumulation limit. Your leave policy should list each cap.

What happens to leave above the carry forward limit?

It either lapses, meaning it is lost, or it is encashed, meaning it is paid out, depending on the policy and the leave type. For annual leave under the OSH Code, the worker has the option of asking for unused leave to be encashed when the year ends. Companies should warn employees before year end so they can plan leave instead of losing it.

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