{"id":6133,"date":"2025-12-19T12:39:24","date_gmt":"2025-12-19T12:39:24","guid":{"rendered":"https:\/\/juntrax.com\/blog\/?p=6133"},"modified":"2026-06-01T16:02:22","modified_gmt":"2026-06-01T16:02:22","slug":"leave-policy-india-2026","status":"publish","type":"post","link":"https:\/\/juntrax.com\/blog\/leave-policy-india-2026\/","title":{"rendered":"Leave Policy Changes in India 2026: Employer Guide to New Labour Codes"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">India&#8217;s leave policy landscape changed materially on 21 November 2025. Four new Labour Codes came into force on that date, repealing 29 central labour laws and rewriting the rules around earned leave, leave encashment, full and final settlements, and the very definition of &#8220;wages&#8221; that sits underneath every leave calculation. For employers planning their 2026 HR cycle, the changes touch nearly every aspect of leave administration, from policy text to payroll math.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This guide explains the leave policy changes in India for 2026, the official position taken by the Ministry of Labour and Employment (<\/span><a href=\"https:\/\/www.labour.gov.in\/\"><span style=\"font-weight: 400;\">MoLE<\/span><\/a><span style=\"font-weight: 400;\">) in its post-implementation FAQs, the gaps where state Shops and Establishments Acts still apply, and a practical compliance checklist HR teams can run before their next leave-policy refresh.<\/span><\/p>\n<p><b>Note:<\/b><span style=\"font-weight: 400;\"> This article provides a general overview. Actual entitlements and compliance requirements may vary based on applicable Central and State law, the nature of the establishment, and any future notifications issued by the Central or State Governments. It is not legal advice.<\/span><\/p>\n<h2><b>What changed on 21 November 2025<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The four Labour Codes (Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions) are now<\/span><a href=\"https:\/\/elplaw.in\/leadership\/india-rolls-out-new-labour-codes\/\"> <span style=\"font-weight: 400;\">in force across India<\/span><\/a><span style=\"font-weight: 400;\">, per the Ministry of Labour and Employment notifications dated 21 November 2025 (with a corrigendum on 19 December 2025).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The eligibility threshold for annual earned leave has dropped from 240 working days to <\/span><b>180 working days<\/b><span style=\"font-weight: 400;\"> in a calendar year under the OSH&amp;WC Code.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Workers can carry forward a maximum of <\/span><b>30 days<\/b><span style=\"font-weight: 400;\"> of accumulated leave to the succeeding calendar year. Leave <\/span><b>applied for but refused<\/b><span style=\"font-weight: 400;\"> by the employer is carried forward without any limit.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annual encashment of leave above 30 days is now an explicit statutory right for workers.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The definition of &#8220;wages&#8221; has been standardised; the <\/span><b>50 percent rule<\/b><span style=\"font-weight: 400;\"> means basic + DA + retaining allowance must be at least half of total remuneration, which raises the base on which leave encashment is paid.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Full and final settlement (including unpaid leave encashment) must be completed within <\/span><b>two working days<\/b><span style=\"font-weight: 400;\"> of the employee&#8217;s last working day.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Maternity leave is now governed by Chapter VI of the<\/span><a href=\"https:\/\/labour.gov.in\/sites\/default\/files\/SS_Code_Gazette.pdf\"> <span style=\"font-weight: 400;\">Code on Social Security, 2020<\/span><\/a><span style=\"font-weight: 400;\">, retaining the 26-week \/ 12-week structure. A March 2026 Supreme Court ruling further extended maternity rights for adoptive mothers.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Central and most State Rules are still being finalised. Existing state-level Shops and Establishments Acts continue to apply where they are not inconsistent with, or are more favourable than, the Labour Codes.<\/span><\/li>\n<\/ul>\n<h2><b>Why 2026 is different from earlier policy reviews<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">In most years, reviewing a leave policy is housekeeping work: updating the holiday list, validating carry-forward balances, and refreshing the maternity section if a recent ruling demanded it. 2026 is different in three ways.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">First, the <\/span><b>statutory base has moved<\/b><span style=\"font-weight: 400;\">. Twenty-nine central labour laws have been subsumed into the four Codes, and the<\/span><a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/01\/03\/labour-ministry-issued-faqs-on-the-labour-codes\/\"> <span style=\"font-weight: 400;\">Ministry of Labour and Employment confirms<\/span><\/a><span style=\"font-weight: 400;\"> the codes are operative even where State Rules are still pending. Existing rules and regulations continue only to the extent they are not inconsistent with the Codes.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Second, the <\/span><b>wage definition<\/b><span style=\"font-weight: 400;\"> has been re-engineered. Leave encashment, gratuity, retrenchment compensation, and statutory bonus all flow from the same &#8220;wages&#8221; figure. When the<\/span><a href=\"https:\/\/elplaw.in\/leadership\/india-rolls-out-new-labour-codes\/\"> <span style=\"font-weight: 400;\">50 percent floor<\/span><\/a><span style=\"font-weight: 400;\"> on basic + DA + retaining allowance triggers, the encashment base climbs, and so does the employer&#8217;s liability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Third, <\/span><b>enforcement timelines have tightened<\/b><span style=\"font-weight: 400;\">. Two working days for full and final settlement leaves no room for the legacy practice of clearing dues weeks after exit. HR, payroll, and finance need to operate from a single, real-time leave ledger.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For HR teams running pan-India operations, the practical implication is that a policy refresh in 2026 is part legal, part payroll, and part technology. None of those can be done in isolation.<\/span><\/p>\n<h2><b>The four Labour Codes and where leave provisions sit<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The four Codes consolidate the prior labour-law landscape into a structure that is easier to navigate once you know which Code governs what.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Labour Code<\/b><\/td>\n<td><b>Primary scope<\/b><\/td>\n<td><b>Key leave-related provisions<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Code on Wages, 2019<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Minimum wages, payment of wages, equal remuneration, bonus<\/span><\/td>\n<td><span style=\"font-weight: 400;\">New &#8220;wages&#8221; definition (Section 2(y)) used for leave encashment calculation<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Industrial Relations Code, 2020<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Trade unions, industrial disputes, standing orders<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Two-day full and final settlement window<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Code on Social Security, 2020<\/b><\/td>\n<td><span style=\"font-weight: 400;\">EPF, ESI, gratuity, maternity, gig and platform workers<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Maternity benefits (Chapter VI), gratuity for fixed-term employees<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Occupational Safety, Health and Working Conditions Code, 2020<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Working conditions for workers, factories, mines, contract labour<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Annual leave eligibility (180 days), carry-forward, encashment rules<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">The biggest single source of leave-related change is the <\/span><b>OSH&amp;WC Code<\/b><span style=\"font-weight: 400;\">. The Code on Social Security carries the maternity-benefit framework. The Code on Wages controls the value of each encashed day.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A nuance often missed: the OSH&amp;WC leave provisions apply to <\/span><b>&#8220;workers&#8221;<\/b><span style=\"font-weight: 400;\"> as defined in Section 2(1)(zzl), which now includes sales promotion employees and working journalists but excludes supervisors earning above \u20b918,000 per month and apprentices. For senior managerial and white-collar staff in commercial establishments, the <\/span><b>State Shops and Establishments Act<\/b><span style=\"font-weight: 400;\"> continues to govern leave entitlements. We unpack that distinction in detail later in this guide.<\/span><\/p>\n<h2><b>Six leave-policy changes employers must act on for 2026<\/b><\/h2>\n<h3><b>1. Earned-leave eligibility drops from 240 to 180 working days<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Under the<\/span><a href=\"https:\/\/www.indiacode.nic.in\/handle\/123456789\/2392\"> <span style=\"font-weight: 400;\">Factories Act, 1948 (Section 79)<\/span><\/a><span style=\"font-weight: 400;\">, a worker had to complete 240 days of work in a calendar year before becoming eligible for annual leave with wages. The OSH&amp;WC Code, 2020 lowers this threshold to <\/span><b>180 working days<\/b><span style=\"font-weight: 400;\">, while keeping the accrual rate at one day for every twenty days of work for adult workers (and one day for every fifteen days for workers below fifteen years of age).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The<\/span><a href=\"https:\/\/www.pib.gov.in\/FactsheetDetails.aspx?Id=150475&amp;reg=3&amp;lang=2\"> <span style=\"font-weight: 400;\">Press Information Bureau factsheet<\/span><\/a><span style=\"font-weight: 400;\"> explains the rationale as ensuring &#8220;enough rest and recovery, improving productivity and job satisfaction.&#8221; MoLE&#8217;s<\/span><a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/01\/03\/labour-ministry-issued-faqs-on-the-labour-codes\/\"> <span style=\"font-weight: 400;\">FAQ dated 30 December 2025<\/span><\/a><span style=\"font-weight: 400;\"> confirms the position formally.<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Update the eligibility clause in your leave policy from 240 to 180 working days.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Recalculate which mid-year joiners will now cross the threshold during 2026; they will accrue annual leave earlier than your existing policy expects.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confirm whether your HRMS leave-accrual logic is configured to apply the 180-day rule from 21 November 2025, not from 1 April 2026.<\/span><\/li>\n<\/ul>\n<h3><b>2. Carry-forward is capped at 30 days, with one important exception<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The OSH&amp;WC Code permits a worker to carry forward up to <\/span><b>30 days<\/b><span style=\"font-weight: 400;\"> of accumulated leave to the succeeding calendar year. Anything above that has to be either availed or encashed, depending on the policy.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The MoLE&#8217;s<\/span><a href=\"https:\/\/www.labour.gov.in\/static\/uploads\/2026\/03\/a4ccf4c6d97c4f1f36a6d83f8c64213d.pdf\"> <span style=\"font-weight: 400;\">March 2026 FAQ<\/span><\/a><span style=\"font-weight: 400;\"> clarifies a critical exception: if a worker has <\/span><b>applied for leave with wages and the employer has refused<\/b><span style=\"font-weight: 400;\"> it, the refused leave can be carried forward <\/span><b>without any limit<\/b><span style=\"font-weight: 400;\">. This protects employees from being penalised for an employer&#8217;s operational decision to deny a leave request.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Where a State law is more favourable to the worker (Andhra Pradesh, for example, has permitted 60 days carry-forward in some categories), the more beneficial provision will continue to apply per<\/span><a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/04\/26\/ministry-faqs-four-labour-codes-india-2026\/\"> <span style=\"font-weight: 400;\">Section 132 of the OSH Code<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cap automatic carry-forward at 30 days in your HRMS configuration.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Build a separate &#8220;refused leave&#8221; bucket that tracks employer-denied applications and carries the balance forward without cap.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Document and timestamp every refusal in writing; this becomes the audit trail.<\/span><\/li>\n<\/ul>\n<h3><b>3. Annual leave encashment is now an explicit statutory entitlement<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Historically, many private-sector employers operated a &#8220;use it or lose it&#8221; policy, where leave beyond the carry-forward limit simply lapsed at year-end. The OSH&amp;WC Code formally ends that practice for covered workers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The<\/span><a href=\"https:\/\/www.labour.gov.in\/static\/uploads\/2026\/03\/a4ccf4c6d97c4f1f36a6d83f8c64213d.pdf\"> <span style=\"font-weight: 400;\">MoLE FAQ<\/span><\/a><span style=\"font-weight: 400;\"> confirms three points:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">There is <\/span><b>no prescribed maximum limit<\/b><span style=\"font-weight: 400;\"> on the number of days that can be encashed under the OSH&amp;WC Code.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Leave exceeding 30 days, if applied for but not granted, may be encashed at the <\/span><b>end of the calendar year<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">On separation from service (resignation, retirement, termination, death), the worker is entitled to encash <\/span><b>all<\/b><span style=\"font-weight: 400;\"> accumulated leave to credit.<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">The implication for employers is that lapsing of accrued leave is no longer a default; encashment is. As the<\/span><a href=\"https:\/\/vedjainassociates.com\/insights\/the-hidden-liability-how-the-new-labour-codes-redefine-leave-encashment\"> <span style=\"font-weight: 400;\">Ved Jain &amp; Associates analysis<\/span><\/a><span style=\"font-weight: 400;\"> notes, this represents a &#8220;hidden liability&#8221; for finance teams that had previously planned around forfeiture assumptions.<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Replace lapsing-based language in your leave policy with encashment-based language.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Have your actuarial team revisit the leave-encashment provision in your books; the higher frequency of payouts and the wider wage definition can both inflate the number.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Decide a year-end calendar process: encash above-30-day balances by a fixed cut-off, document the policy clearly, and communicate it to employees ahead of the next leave year.<\/span><\/li>\n<\/ul>\n<h3><b>4. The new &#8220;wages&#8221; definition raises the encashment base<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This is the change with the most underestimated financial impact. The Code on Wages, 2019 introduces a single, standardised definition of &#8220;wages&#8221; across all four Codes (<\/span><a href=\"https:\/\/labour.gov.in\/sites\/default\/files\/Code_on_Wages_2019.pdf\"><span style=\"font-weight: 400;\">Section 2(y)<\/span><\/a><span style=\"font-weight: 400;\">). It includes:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Basic pay<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Dearness allowance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Retaining allowance (where applicable)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">It explicitly excludes items such as house rent allowance, conveyance, overtime, bonus, commission, statutory contributions, and gratuity.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The <\/span><b>proviso<\/b><span style=\"font-weight: 400;\"> is where the math changes. If the total of all &#8220;excluded&#8221; components (HRA, conveyance, etc.) exceeds <\/span><b>50 percent of total remuneration<\/b><span style=\"font-weight: 400;\">, the excess is <\/span><b>added back<\/b><span style=\"font-weight: 400;\"> to wages. The<\/span><a href=\"https:\/\/www.businesstoday.in\/latest\/economy\/story\/labour-ministry-publishes-draft-rules-on-labour-codes-seeks-response-within-45-days-508876-2025-12-31\"> <span style=\"font-weight: 400;\">Ministry&#8217;s clarification<\/span><\/a><span style=\"font-weight: 400;\"> is that this re-engineered wage figure flows into every statutory calculation: PF, gratuity, leave encashment, overtime, statutory bonus, and retrenchment compensation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In legacy salary structures, basic pay was often kept low (around 30 percent of CTC) so that PF and gratuity costs stayed contained. Those structures will frequently fail the 50 percent test, which means the wage base used for leave encashment can be significantly higher than the legacy &#8220;basic + DA&#8221; figure HR teams have historically used.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The<\/span><a href=\"https:\/\/kpmg.com\/in\/en\/blogs\/2025\/12\/implementation-of-labour-codes-what-changes-and-road-ahead.html\"> <span style=\"font-weight: 400;\">KPMG India analysis<\/span><\/a><span style=\"font-weight: 400;\"> puts it plainly: until salary structures are realigned, employers will face leave encashment payouts that &#8220;may unintentionally work out to be higher than 50 percent of the total package.&#8221;<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Audit your top three salary structures (junior, mid, senior) and check whether basic + DA + retaining allowance hits 50 percent of total remuneration.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Where it does not, model the gap and decide whether to restructure salaries or absorb the higher statutory cost.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Realign payroll-software calculation rules so leave encashment is computed on the new wage base from 21 November 2025, not from a future date.<\/span><\/li>\n<\/ul>\n<h3><b>5. Full and final settlement within two working days<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Under the IR Code, 2020 (Section 78), all dues including unpaid leave encashment must be settled within <\/span><b>two working days<\/b><span style=\"font-weight: 400;\"> of the employee&#8217;s last working day, regardless of whether the exit is voluntary or involuntary. The<\/span><a href=\"https:\/\/elplaw.in\/leadership\/india-rolls-out-new-labour-codes\/\"> <span style=\"font-weight: 400;\">ELP Law update<\/span><\/a><span style=\"font-weight: 400;\"> flags this as a clear departure from the prior regime, where the two-day timeline applied only in cases of dismissal, removal, retrenchment, or closure-related unemployment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under the OSH Code, leave encashment in cases of death or superannuation must be settled within <\/span><b>two months<\/b><span style=\"font-weight: 400;\"> of the event.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For HR and payroll teams, the operational change is structural rather than incremental. Final settlements can no longer be queued up for the next month-end payroll cycle. The leave ledger, payroll ledger, and finance approval workflow have to operate in parallel during the notice period.<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Run your exit process backwards from the last working day; identify every approval that needs to happen before day-zero.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Move leave-balance reconciliation forward in the notice period instead of triggering it on the last day.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Configure your HRMS to auto-generate the F&amp;F statement (including leave encashment, gratuity, notice pay, expense claims, and recoveries) for HR review at least three working days before exit.<\/span><\/li>\n<\/ul>\n<h3><b>6. Know who is actually a &#8220;worker&#8221; under the OSH Code<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This is the most commonly missed nuance in employer leave policies post-Codes. The OSH&amp;WC Code leave provisions apply only to <\/span><b>&#8220;workers&#8221;<\/b><span style=\"font-weight: 400;\">, not to all &#8220;employees.&#8221;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The<\/span><a href=\"https:\/\/labour.gov.in\/sites\/default\/files\/OSH_Code_Gazette.pdf\"> <span style=\"font-weight: 400;\">definition of &#8220;worker&#8221;<\/span><\/a><span style=\"font-weight: 400;\"> under Section 2(1)(zzl) of the OSH Code:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Includes<\/b><span style=\"font-weight: 400;\">: persons employed in any establishment to do manual, unskilled, skilled, technical, operational, clerical, or supervisory work; sales promotion employees; working journalists.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Excludes<\/b><span style=\"font-weight: 400;\">: persons employed mainly in a managerial or administrative capacity; persons employed in a supervisory capacity drawing wages exceeding <\/span><b>\u20b918,000 per month<\/b><span style=\"font-weight: 400;\"> (raised from \u20b910,000 under the Industrial Disputes Act); apprentices; armed forces.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The<\/span><a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/04\/26\/ministry-faqs-four-labour-codes-india-2026\/\"> <span style=\"font-weight: 400;\">Supreme Court Cases Online analysis<\/span><\/a><span style=\"font-weight: 400;\"> of MoLE&#8217;s March 2026 FAQ confirms that a relationship manager or salesperson drawing wages above \u20b918,000 per month is not entitled to leave encashment under the OSH Code (though sales promotion employees specifically are, regardless of pay, because of how the Code defines them).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For everyone outside the &#8220;worker&#8221; definition (most managerial and senior white-collar staff in commercial establishments), leave entitlements continue to be governed by the applicable <\/span><b>State Shops and Establishments Act<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><b>What employers should do:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Map every role in your organisation against the OSH Code&#8217;s &#8220;worker&#8221; definition and the applicable State Shops and Establishments Act.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Maintain a clear two-tier classification in your HRIS: covered-worker leaves and other-employee leaves, since the accrual, carry-forward, and encashment rules may differ for the two groups.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Document the basis for each classification; this is exactly the kind of detail an Inspector-cum-Facilitator under the new digital inspection regime will look at.<\/span><\/li>\n<\/ul>\n<h2><b>Maternity leave in India: rules for 2026<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Maternity benefits are now consolidated under<\/span><a href=\"https:\/\/labour.gov.in\/sites\/default\/files\/SS_Code_Gazette.pdf\"> <span style=\"font-weight: 400;\">Chapter VI of the Code on Social Security, 2020<\/span><\/a><span style=\"font-weight: 400;\">, which subsumed the Maternity Benefit Act, 1961 (along with the 2017 amendment) when the Codes came into force on 21 November 2025. The substantive entitlements remain largely unchanged.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Provision<\/b><\/td>\n<td><b>Entitlement<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Paid maternity leave (first two children)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">26 weeks (up to 8 weeks may be taken pre-delivery)<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Paid maternity leave (third child onwards)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 weeks (up to 6 weeks pre-delivery)<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Adoptive mothers<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 weeks from the date the child is handed over<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Commissioning mothers (surrogacy)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 weeks from the date the child is handed over<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Miscarriage leave<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6 weeks from the date of miscarriage<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Tubectomy leave<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2 weeks from the date of the operation<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Additional leave for complications<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Up to 1 month, with medical certification<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Eligibility<\/span><\/td>\n<td><span style=\"font-weight: 400;\">At least 80 days of work in the 12 months preceding the expected delivery<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Applicability<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Establishments with 10 or more employees<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Cr\u00e8che facility<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Mandatory at 50 or more employees<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">A landmark Supreme Court ruling on <\/span><b>17 March 2026<\/b><span style=\"font-weight: 400;\"> in <\/span><i><span style=\"font-weight: 400;\">Hamsaanandini Nanduri v. Union of India<\/span><\/i><span style=\"font-weight: 400;\"> struck down the long-standing rule that limited the 12-week adoption-based maternity benefit to mothers who adopted children below the age of three months. As reported by<\/span><a href=\"https:\/\/employsome.com\/hire\/india\/maternity-leave-india\/\"> <span style=\"font-weight: 400;\">Employsome&#8217;s 2026 guide<\/span><\/a><span style=\"font-weight: 400;\">, the court held the three-month age cap as inconsistent with Article 14 of the Constitution and extended the 12-week entitlement to <\/span><b>all adoptive mothers, regardless of the adopted child&#8217;s age<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><b>What employers should do for 2026:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Update your maternity policy to remove any reference to the three-month adoption age limit (it is now unenforceable).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confirm wage payment during leave uses the new &#8220;wages&#8221; definition under the SS Code.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For establishments with 50 or more employees, audit cr\u00e8che facilities and access policies (the Ministry clarifies that cr\u00e8che facilities apply to all employees, regardless of the workforce&#8217;s gender composition).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Document your nursing-break policy (two breaks of prescribed duration until the child is 15 months old) and the option of work-from-home post-leave subject to mutual agreement.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For a deeper treatment of maternity leave compliance, including ESI coverage for women earning under \u20b921,000 per month and the<\/span><a href=\"https:\/\/wcd.nic.in\/schemes\/pradhan-mantri-matru-vandana-yojana\"> <span style=\"font-weight: 400;\">Pradhan Mantri Matru Vandana Yojana (PMMVY) cash benefit<\/span><\/a><span style=\"font-weight: 400;\">, refer to the<\/span><a href=\"https:\/\/wcd.nic.in\/\"> <span style=\"font-weight: 400;\">Ministry of Women and Child Development guidelines<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2><b>Paternity, adoption, surrogacy, and other special leave<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">India still does not have a central statutory paternity-leave entitlement for private-sector employers. The current position:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Central government employees<\/b><span style=\"font-weight: 400;\"> are entitled to 15 days of paid paternity leave within six months of childbirth or adoption, per the Central Civil Services (Leave) Rules, 1972.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Private-sector employers<\/b><span style=\"font-weight: 400;\"> offer paternity leave voluntarily. Around 14 percent of Indian companies have a formal policy, with leading employers offering significantly more: Zomato has publicly committed to 26 weeks, Wipro offers 8 weeks (extended to biological, adoptive, and in loco parentis caregivers).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <\/span><b>Paternity and Parental Benefit Bill, 2025<\/b><span style=\"font-weight: 400;\"> (introduced by MP Supriya Sule in the Lok Sabha) proposes 8 weeks of paid paternity leave plus 8 weeks of shared parental leave within 18 months of birth. The bill is currently a private member&#8217;s bill and has not been taken up for discussion.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The Supreme Court&#8217;s March 2026 observations in <\/span><i><span style=\"font-weight: 400;\">Hamsaanandini Nanduri<\/span><\/i><span style=\"font-weight: 400;\"> explicitly urged Parliament to legislate paternity leave as a social security right, which increases the likelihood of formal legislation over the next 12 to 24 months. Employers planning competitive parental-leave benefits will want to monitor this space closely.<\/span><\/p>\n<h2><b>State-specific leave entitlements: where the Shops and Establishments Acts still apply<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">For most office, IT, and commercial establishments (and for any employee outside the OSH Code&#8217;s &#8220;worker&#8221; definition), leave continues to be governed by the applicable <\/span><b>State Shops and Establishments Act<\/b><span style=\"font-weight: 400;\">. These Acts vary significantly. The table below covers the major employment-heavy states.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>State<\/b><\/td>\n<td><b>Earned\/Privilege Leave<\/b><\/td>\n<td><b>Casual Leave<\/b><\/td>\n<td><b>Sick Leave<\/b><\/td>\n<td><b>Max Carry-Forward<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Karnataka<\/b><\/td>\n<td><span style=\"font-weight: 400;\">1 day for every 20 days worked (~18 days\/year)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year (combined with sick leave; mandatory utilisation)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Included in 12-day combined CL\/SL<\/span><\/td>\n<td><span style=\"font-weight: 400;\">30 days<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Maharashtra (Shops)<\/b><\/td>\n<td><span style=\"font-weight: 400;\">1 day for every 20 days worked, capped at 21 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">8 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Included with casual leave in some cases<\/span><\/td>\n<td><span style=\"font-weight: 400;\">42 days<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Delhi<\/b><\/td>\n<td><span style=\"font-weight: 400;\">15 days\/year after 12 months of continuous service<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Up to 3x annual entitlement (~45 days)<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Tamil Nadu<\/b><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year after 12 months<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">30 days<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Telangana<\/b><\/td>\n<td><span style=\"font-weight: 400;\">15 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">12 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">60 days<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>West Bengal<\/b><\/td>\n<td><span style=\"font-weight: 400;\">14 days\/year after 12 months<\/span><\/td>\n<td><span style=\"font-weight: 400;\">10 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">14 days\/year<\/span><\/td>\n<td><span style=\"font-weight: 400;\">28 days<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">These figures are statutory minimums; employers are free to offer more. Where the State law is more favourable than the OSH Code (for example, Andhra Pradesh&#8217;s 60-day carry-forward limit), the State law continues to govern per the OSH Code&#8217;s<\/span><a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/04\/26\/ministry-faqs-four-labour-codes-india-2026\/\"> <span style=\"font-weight: 400;\">non-derogation provision<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The takeaway for HR teams running distributed teams: a single pan-India leave policy will rarely be compliant in every state. Configure your HRMS to apply the location-based rule, and document the basis for any difference an employee in Bengaluru sees from a peer in Mumbai.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For state-by-state working-hour limits, overtime rules, and registration thresholds, the<\/span><a href=\"https:\/\/labour.gov.in\/state-labour-departments\"> <span style=\"font-weight: 400;\">labour department portals of each state<\/span><\/a><span style=\"font-weight: 400;\"> are the authoritative source.<\/span><\/p>\n<h2><b>National and public holidays: what is statutorily required<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">India has <\/span><b>three nationally observed public holidays<\/b><span style=\"font-weight: 400;\"> that are compulsory across all states and union territories:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Republic Day<\/b><span style=\"font-weight: 400;\"> (26 January)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Independence Day<\/b><span style=\"font-weight: 400;\"> (15 August)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gandhi Jayanti<\/b><span style=\"font-weight: 400;\"> (2 October)<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Beyond these, each State Government notifies a list of festivals and restricted holidays under the <\/span><b>Negotiable Instruments Act, 1881<\/b><span style=\"font-weight: 400;\"> and the applicable Shops and Establishments Act. The number varies significantly: Karnataka typically notifies around 20 to 25 holidays, Maharashtra around 15 to 20, and Kerala around 25 (driven by religious diversity in the state).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most employers offer a combination of:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fixed (closed) holidays: typically 8 to 12, including the three national holidays and major regional festivals.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Optional \/ restricted holidays: 2 to 4 days an employee can pick from a published list.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">If a covered worker is required to work on a notified holiday, the OSH&amp;WC Code and most State laws require the employer to provide a substituted day off (compensatory off) or pay the worker for the holiday at the standard rate, plus overtime where applicable.<\/span><\/p>\n<h2><b>Other leave types employers should document clearly<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Labour Codes do not explicitly mandate every category of leave most Indian organisations offer. The categories below are governed either by State law, by company policy, or by best practice; documenting them in writing avoids most disputes.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Casual leave<\/b><span style=\"font-weight: 400;\">: For unanticipated personal needs, typically 7 to 12 days a year. Cannot usually be carried forward or encashed.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Sick leave<\/b><span style=\"font-weight: 400;\">: For medical reasons, typically 7 to 12 days a year. Medical certificate required for absences over 2 to 3 consecutive days. Some State Shops Acts (Karnataka, for example) combine casual and sick leave into a single bucket.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Compensatory off (comp off)<\/b><span style=\"font-weight: 400;\">: One day off, typically usable within the same or next month, for working on a weekly off or notified holiday.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Bereavement leave<\/b><span style=\"font-weight: 400;\">: Not legally mandated. Most employers offer 3 to 5 days; some offer up to 10.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Marriage leave<\/b><span style=\"font-weight: 400;\">: Not legally mandated. Most employers offer 3 to 5 working days, usable once during employment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Study leave \/ sabbatical<\/b><span style=\"font-weight: 400;\">: Discretionary; covered entirely by company policy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Compensatory leave for women on night shifts<\/b><span style=\"font-weight: 400;\">: Per OSH Code, women have the right to work in any establishment and on night shifts with the safeguard of adequate safety, transport, and security arrangements, subject to the worker&#8217;s written consent.<\/span><\/li>\n<\/ul>\n<h2><b>The 2026 employer compliance checklist<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The single-most useful artefact for an HR team in 2026 is a compliance checklist that captures every policy update, payroll re-configuration, and process change triggered by the new Codes. The list below covers the items most teams will need.<\/span><\/p>\n<h3><b>Policy and documentation<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Update the eligibility threshold for earned leave from 240 to 180 working days in the policy text.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cap general carry-forward at 30 days; add a separate, no-cap bucket for refused-leave carry-forward.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Replace any &#8220;lapse&#8221; language with &#8220;encashment&#8221; language for leave above 30 days.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Update the maternity-leave clause to reference Chapter VI of the Code on Social Security, 2020, not the Maternity Benefit Act, 1961.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Remove the three-month age cap on adoptive-mother maternity leave (struck down in March 2026).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confirm the F&amp;F settlement clause specifies a two-working-day timeline from the last working day.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Maintain a separate policy section for State Shops Acts; do not assume the OSH Code covers every employee.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Document the worker-vs-employee classification used for each role.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Republish the updated policy on the employee portal and capture digital acknowledgement.<\/span><\/li>\n<\/ul>\n<h3><b>Payroll and HRMS<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reconfigure your HRMS leave-accrual rule for the 180-day eligibility threshold from 21 November 2025.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Audit your top salary structures for the 50 percent wage-rule compliance.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Update leave-encashment calculation logic to use the new wages definition (basic + DA + retaining allowance, plus any add-back).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Build automated alerts for year-end leave balances above 30 days.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Configure exit workflow to auto-generate F&amp;F statements three working days before the last working day.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Set up a refused-leave register with timestamps and reasons.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Verify state-specific leave entitlements are applied based on the employee&#8217;s work location, not company headquarters.<\/span><\/li>\n<\/ul>\n<h3><b>Finance and actuarial<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Revisit leave-encashment provisions in the books; recalculate using the higher wage base and the loss of forfeiture assumptions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Estimate year-end encashment liability for excess-30-day balances.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confirm gratuity provisions are recalculated using the wage definition effective 21 November 2025.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Review actuarial valuation assumptions with your auditor before financial-year close.<\/span><\/li>\n<\/ul>\n<h3><b>Communication and change management<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Brief the payroll team, HR business partners, and people managers on the new rules before the next leave year begins.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Communicate the updated carry-forward and encashment rules to employees in plain language.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Train approving managers on the legal weight of refusing a leave application (refused leave carries forward without limit).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Document the basis on which any role is classified outside the OSH Code&#8217;s worker definition; this can be reviewed during inspection.<\/span><\/li>\n<\/ul>\n<h2><b>Penalties for non-compliance<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Codes raise the penalty regime for non-compliance materially. Under the Code on Wages alone, the maximum penalty for repeated violations can reach <\/span><b>\u20b91 lakh<\/b><span style=\"font-weight: 400;\"> with imprisonment up to three months. The OSH&amp;WC Code carries fines up to \u20b93 lakh for offences related to working hours, leave, and other welfare provisions. The IR Code provides for penalties up to \u20b91 lakh for violations relating to retrenchment, layoff, and standing orders.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The newly redesignated <\/span><b>Inspector-cum-Facilitator<\/b><span style=\"font-weight: 400;\"> under each Code now operates through a<\/span><a href=\"https:\/\/www.india-briefing.com\/news\/how-indias-new-osh-code-reshapes-labor-compliance-40915.html\/\"> <span style=\"font-weight: 400;\">web-based, randomised inspection scheme<\/span><\/a><span style=\"font-weight: 400;\">, which reduces the discretion that earlier inspectors had but also makes audits more consistent. Maintaining clean digital records is now the lowest-cost compliance investment an employer can make.<\/span><\/p>\n<h2><b>How a unified HRMS reduces compliance risk<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The practical complexity of post-Codes leave administration sits at the intersection of three teams: HR (policy), payroll (calculation), and finance (provisioning). When each runs on a separate spreadsheet or a partially integrated system, gaps appear at exactly the points where the Codes have tightened scrutiny: leave-accrual triggers, carry-forward exceptions, the wage base used for encashment, and the two-working-day F&amp;F timeline.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A unified business-management platform like<\/span><a href=\"https:\/\/juntrax.com\/\"> <span style=\"font-weight: 400;\">Juntrax<\/span><\/a><span style=\"font-weight: 400;\"> lets HR, payroll, and finance operate from a single leave and attendance ledger, which directly addresses the audit points the Codes care about:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Location-aware leave accrual<\/b><span style=\"font-weight: 400;\">: apply the OSH Code rules where they govern, and the relevant State Shops Act elsewhere, automatically.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Real-time encashment liability tracking<\/b><span style=\"font-weight: 400;\">: surface the value of accrued leave on the new wages base, not the legacy basic.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Automated F&amp;F workflow<\/b><span style=\"font-weight: 400;\">: generate the settlement statement on the second working day from exit by default.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Audit-ready logs<\/b><span style=\"font-weight: 400;\">: every leave application, refusal, accrual change, and carry-forward decision sits in a timestamped record.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">For a deeper view on the payroll-side implications, our companion piece on<\/span><a href=\"https:\/\/juntrax.com\/blog\/indian-labour-code-updates-payroll-teams-2026\/\"> <span style=\"font-weight: 400;\">Indian Labour Code updates for payroll teams in 2026<\/span><\/a><span style=\"font-weight: 400;\"> walks through the wage-definition math in detail.<\/span><\/p>\n<h2>Conclusion<\/h2>\n<p><span style=\"font-weight: 400;\">Leave policies in India are shaped by layered laws and local variation. As 2026 approaches, the priority for employers is not anticipating dramatic legal changes but ensuring that existing policies are applied correctly, consistently, and in line with current expectations.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A periodic review grounded in applicable laws and supported by reliable systems can help organizations avoid compliance gaps and operational friction as they scale.<\/span><\/p>\n<h2><b>Frequently asked questions<\/b><\/h2>\n<h3><b>What is the new earned-leave eligibility threshold under the Labour Codes?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Under the Occupational Safety, Health and Working Conditions Code, 2020, a worker now needs to complete 180 working days in a calendar year (down from 240 days) to become eligible for annual leave with wages. The accrual rate remains one day for every twenty days worked for adult workers.<\/span><\/p>\n<h3><b>When did India&#8217;s new Labour Codes come into force?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The four Labour Codes (Code on Wages, 2019; Industrial Relations Code, 2020; Code on Social Security, 2020; and OSH&amp;WC Code, 2020) came into force on <\/span><b>21 November 2025<\/b><span style=\"font-weight: 400;\"> by notification of the Ministry of Labour and Employment, with a corrigendum issued on 19 December 2025.<\/span><\/p>\n<h3><b>Is leave encashment mandatory in India in 2026?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Yes, for covered workers under the OSH&amp;WC Code. Leave above the 30-day carry-forward cap, if applied for but not granted, can be encashed at the end of the calendar year. At separation from service (resignation, retirement, termination, or death), the worker is entitled to encash all leave to credit. There is no prescribed maximum on the number of days that can be encashed.<\/span><\/p>\n<h3><b>How is leave encashment calculated under the new wage definition?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Leave encashment is calculated on &#8220;wages&#8221; as defined in Section 2(y) of the Code on Wages, 2019: basic pay plus dearness allowance plus retaining allowance. If the total of excluded components (HRA, conveyance, overtime, bonus, etc.) exceeds 50 percent of total remuneration, the excess amount is added back to wages, raising the encashment base.<\/span><\/p>\n<h3><b>Does the Labour Code&#8217;s 180-day rule apply to white-collar managerial employees?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Not directly. The OSH&amp;WC Code&#8217;s leave provisions apply to &#8220;workers&#8221; as defined in Section 2(1)(zzl), which excludes employees in managerial or administrative roles and supervisors earning above \u20b918,000 per month. For these employees, leave entitlements continue to be governed by the applicable State Shops and Establishments Act.<\/span><\/p>\n<h3><b>What is the maximum number of days a worker can carry forward under the OSH Code?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A worker can carry forward a maximum of 30 days to the succeeding calendar year. There is a critical exception: if a worker has applied for leave and the employer has refused it, the refused leave carries forward without any limit.<\/span><\/p>\n<h3><b>Has maternity leave duration changed under the new Labour Codes?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The substantive entitlements have not changed: 26 weeks for the first two children, 12 weeks from the third child onwards. The governing statute is now Chapter VI of the Code on Social Security, 2020, which subsumed the Maternity Benefit Act, 1961. A March 2026 Supreme Court ruling (<\/span><i><span style=\"font-weight: 400;\">Hamsaanandini Nanduri v. Union of India<\/span><\/i><span style=\"font-weight: 400;\">) expanded adoptive-mother maternity rights by striking down the three-month age cap on the adopted child.<\/span><\/p>\n<h3><b>What is the timeline for full and final settlement under the Industrial Relations Code?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">All dues, including unpaid leave encashment, must be settled within <\/span><b>two working days<\/b><span style=\"font-weight: 400;\"> of the employee&#8217;s last working day, irrespective of whether the exit is voluntary or involuntary. In cases of death or superannuation, leave encashment must be paid within two months.<\/span><\/p>\n<h3><b>Do State Shops and Establishments Acts still apply after the Labour Codes are in force?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Yes. State Shops and Establishments Acts continue to apply to commercial establishments and to employees who fall outside the OSH&amp;WC Code&#8217;s &#8220;worker&#8221; definition. Where State law conflicts with the Code, the Code prevails, except where the State provision is more favourable to the worker.<\/span><\/p>\n<h3><b>What penalties can an employer face for leave-policy non-compliance under the new Codes?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Penalties vary by Code. The OSH&amp;WC Code carries fines up to \u20b93 lakh for offences related to working hours, leave, and welfare provisions. The Code on Wages carries fines up to \u20b91 lakh with imprisonment up to three months for repeated violations. Inspections are now conducted by Inspector-cum-Facilitators through a web-based, randomised system.<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>India&#8217;s leave policy landscape changed materially on 21 November 2025. Four new Labour Codes came into force on that date, repealing 29 central labour laws and rewriting the rules around earned leave, leave encashment, full and final settlements, and the very definition of &#8220;wages&#8221; that sits underneath every leave calculation. For employers planning their 2026 [&hellip;]<\/p>\n","protected":false},"author":32,"featured_media":6134,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-6133","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Leave Policy Changes in India 2026<\/title>\n<meta name=\"description\" content=\"A practical overview of leave policy changes in India, recent developments, and what employers should review for 2026.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/juntrax.com\/blog\/leave-policy-india-2026\/\" \/>\n<meta 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