Annual Leave, Carry Forward and Encashment

Month-by-month accrual for a mid-year joiner

The Code does not print a monthly schedule; it gives a ratio. Here is how leave builds for a worker who joins on 1 July, using assumed days worked each month and the statutory rate of one day of leave for every twenty days worked. The worker first has to clear the mid-year gate of working one-fourth of the days left in the year.

Illustrative only. The days worked in each month are assumed inputs used to show the arithmetic; the accrual ratio of one day of leave per twenty days worked is the statutory rate under Section 32. The fractions shown are raw arithmetic, and how a fraction of a day is rounded is set by the rules, not by the text of the Code.

The rule in plain words

The Occupational Safety, Health and Working Conditions Code, 2020 gives every worker in a covered establishment a right to paid leave in a calendar year. The first gate is time served: a worker who has worked one hundred and eighty days or more in that calendar year qualifies for the year's leave with wages.

Leave then builds by a simple ratio. A general worker earns one day of leave for every twenty days worked in the calendar year. An adolescent worker earns one day for every fifteen days worked, and a worker employed below ground in a mine also earns one day for every fifteen days worked.

Two counting rules matter. Periods of layoff, maternity leave, or annual leave already taken are counted toward reaching the one hundred and eighty day mark, but the worker does not earn fresh leave for those same periods. And when a holiday falls in the middle of a spell of leave, or is prefixed or suffixed to it, that holiday is not treated as leave, so it does not eat into the leave balance.

• General worker: one day of leave per twenty days worked.
• Adolescent worker: one day per fifteen days worked.
• Worker below ground in a mine: one day per fifteen days worked.
• Mid-year joiner: the same per-twenty-days rate, but qualifies by working one-fourth of the days left in the year rather than the full one hundred and eighty.

Worked example: a worker who joins on 1 July

Because service did not start on 1 January, the one hundred and eighty day gate does not apply directly to this worker. Instead the Code asks whether the worker put in at least one-fourth of the days remaining in the calendar year. From 1 July to 31 December is 184 days in this illustration, so one-fourth is about 46 days. These day counts depend on the assumed join date and are illustrative, but the one-fourth test itself comes straight from the Code.

Once past that gate, the same ratio applies: one day of leave for every twenty days worked. The table above walks the accrual month by month using illustrative days worked. By the end of the year the worker has logged 150 illustrative days, which at one day per twenty days works out to 7.5 days of accrued leave. How a half-day fraction is rounded is a matter for the rules, not for the text of the Code.

Exceptions and fine print

Untaken leave does not simply lapse. Leave a worker does not use in one calendar year is added to the next year, but with a ceiling: the total that can be carried forward into the following year cannot exceed thirty days.

There is an important exception to that ceiling. If a worker applied for leave with wages and the employer refused or did not grant it, the refused leave carries forward with no limit at all. The thirty-day cap does not bite on leave the worker asked for but was denied.

• Coverage can grow: the appropriate Government may, by notification, extend these leave provisions to other establishments, though not to a railway establishment.
• Mines and better terms: these provisions do not cut down any better right a mine worker holds under another law, award, agreement, or contract of service. Where such an instrument gives longer annual leave, that longer quantum applies, while the way leave is taken still follows the Code for anything the instrument is silent on.
• Mine exemption: if the Central Government is satisfied that a mine's own leave rules are not less favourable than the Code, it may exempt that mine from these provisions, subject to conditions.

What an employer must do

• Track each worker's days worked across the calendar year and test them against the one hundred and eighty day gate, or the one-fourth-of-remainder gate for mid-year joiners.
• Apply the correct accrual ratio: one day per twenty days for general workers, one day per fifteen for adolescents and below-ground mine workers.
• Count layoff, maternity leave, and leave already availed toward the qualifying period, but do not grant fresh leave for those same days.
• When a holiday falls within, or is prefixed or suffixed to, a leave spell, exclude it from the leave debited.
• Carry forward untaken leave into the next year up to thirty days, and carry forward refused leave with no cap.
• Honour a worker's demand to encash leave at the end of the calendar year, and let a worker encash any balance above the thirty-day carry-forward limit.
• On discharge, dismissal, quitting, superannuation, or death in service, pay wages in lieu of earned leave within the timeframes the Code sets.

What a worker can do

• Check your eligibility: full-year workers need one hundred and eighty days, while a mid-year joiner qualifies by working one-fourth of the days left in the year.
• Apply for the leave you have earned during the year.
• Carry untaken leave into next year, up to the thirty-day ceiling.
• If you applied for leave and it was refused, know that the refused leave carries forward without any limit.
• At the end of the calendar year, demand encashment of leave if you want it paid rather than carried.
• Claim encashment of any leave balance that exceeds thirty days.
• If you leave the job, are superannuated, or die in service, you or your heir or nominee can claim wages in lieu of the leave you had earned.

Encashment: two distinct entitlements

The Code sets out encashment in two places, and they are not the same thing. First, a worker has a standing right to demand encashment of leave at the end of the calendar year. This is a demand-based right: the worker chooses to be paid out rather than carry the leave over.

Second, and separately, where a worker's total leave exceeds the thirty days that may be carried forward, the worker is entitled to encash that excess. So the thirty-day carry-forward ceiling is not a place where leave is lost; anything over the ceiling converts into an encashment entitlement.

Leave when employment ends

If a worker is discharged, dismissed, quits, is superannuated, or dies while in service during the calendar year, the leave earned does not vanish. The worker, or the heir or nominee, is entitled to wages in lieu of the leave the worker had earned immediately before that event, calculated on the same rules above. This holds even if the worker had not yet worked long enough in the year to actually take the leave.

The Code also fixes when this money must be paid. Where a worker is discharged, dismissed, or quits, payment must be made before the expiry of the second working day after that event. Where a worker is superannuated or dies in service, payment must be made within two months of that date.

Frequently asked questions