Leave Policy Template for Indian Companies (with Sample Clauses)

If you are searching for a leave policy template for an Indian company, you probably need something you can adapt this week, not a theory lecture. Below is a complete, clause by clause template written in plain language, with notes on where you must insert numbers from your state Shops and Establishments Act or the OSH Code. It is designed for companies between 20 and 1,000 employees in offices, retail, services and light operations. Treat it as a starting point: review it against your state rules, adapt it to your culture and have counsel look at it if you operate in many states.

How to Use This Leave Policy Template

Each section below contains model wording in italics followed by guidance. Replace text in square brackets. Delete any leave type you will not offer. Keep numbered clauses so managers can refer to "clause 6.2" in conversations, which makes disputes much easier to resolve.

Before you fill in the numbers, list your work locations and check the minimum leave and holiday entitlements in each state. The Labour Codes came into force on 21 November 2025, and states have been notifying rules at different speeds, so confirm the current position rather than relying on an old circular.

Section 1: Purpose, Scope and Definitions

"1.1 This policy sets out the types of leave available to employees of [Company Name], how leave is earned, applied for, approved and recorded.

1.2 This policy applies to all permanent and fixed-term employees. Interns, consultants and contract workers are covered by the terms of their individual agreements.

1.3 The leave year is [1 January to 31 December / 1 April to 31 March].

1.4 'Working day' means a day on which the employee is scheduled to work as per their shift or roster. 'Reporting manager' means the person to whom the employee reports as recorded in the HR system."

Guidance: be explicit about who is covered. Confusion about whether fixed-term staff get the same leave is common, and under the Social Security Code framework fixed-term employees are expected to receive benefits comparable to permanent staff doing similar work.

Section 2: Leave Types and Entitlements

"2.1 Employees are entitled to the following leave in each leave year:"

Leave type	Entitlement	Credit method	Carry forward
Earned leave	[15] days	[1.25] days per completed month	Up to [45] days
Casual leave	[7] days	Credited at start of year, prorated for joiners	Lapses
Sick leave	[8] days	Credited at start of year, prorated for joiners	Up to [24] days
Paternity leave	[7] working days	Per event	Not applicable
Bereavement leave	[3] working days	Per event	Not applicable
Maternity leave	As per applicable law	Per event	Not applicable

"2.2 Where the law of the state in which an employee works provides a higher entitlement, the higher entitlement will apply to that employee."

Guidance: clause 2.2 is a useful safety net for multi-state employers. It does not replace checking, but it signals intent and protects you if a state minimum changes.

Section 3: Accrual, Proration and Eligibility

"3.1 Earned leave accrues monthly. An employee who joins on or before the 15th of a month will be credited leave for that month. An employee who joins after the 15th will be credited from the following month.

3.2 Casual and sick leave for employees joining mid-year will be prorated by the number of complete months remaining in the leave year, rounded to the nearest half day.

3.3 Employees on probation accrue all leave from their date of joining. They may avail casual and sick leave during probation. Earned leave may be availed during probation only with approval of the department head.

3.4 Leave does not accrue during periods of unpaid leave exceeding [15] consecutive days."

Worked example for clause 3.2: an employee joins on 3 July in a January to December leave year with 7 days of casual leave. Complete months remaining including July are 6, so the entitlement is 7 x 6 / 12 = 3.5 days.

Section 4: Applying for and Approving Leave

"4.1 All leave must be applied for through [the HR system / leave form] and approved by the reporting manager before it is taken, except casual and sick leave taken in an emergency.

4.2 Notice periods: earned leave of up to 3 days, [7] calendar days in advance; earned leave of more than 3 days, [21] calendar days in advance.

4.3 For unplanned leave, the employee must inform the reporting manager by phone or message before the start of the working day and apply in the system within [2] working days of return.

4.4 Sick leave of more than [2] consecutive working days requires a medical certificate. Fitness certificates may be requested after illness of more than [7] days.

4.5 Managers must respond to leave requests within [3] working days. Requests not acted upon will be escalated to [department head / HR].

4.6 The company may decline or ask to reschedule earned leave for operational reasons. Reasons will be given in writing and the employee will be offered alternative dates."

Section 5: Holidays, Weekly Offs and Sandwich Rule

"5.1 The company will publish a holiday calendar for each location before the start of the leave year, including national holidays and festival holidays as required by state law.

5.2 Employees may choose [2] restricted holidays per year from the published restricted holiday list.

5.3 Weekly offs and holidays falling within a period of earned leave [will / will not] be counted as leave."

Guidance: clause 5.3 is your sandwich rule. Pick one and give an example in your FAQ. If you have several states, build a separate list for each; our guide to preparing a holiday calendar for multi-state teams walks through it.

Section 6: Carry Forward, Lapse and Encashment

"6.1 Unused earned leave will be carried forward to the next leave year up to a maximum accumulation of [45] days. Leave above this limit will [lapse / be encashed] at the end of the leave year.

6.2 Unused casual leave lapses at the end of the leave year and is not encashable.

6.3 Unused sick leave may be carried forward up to [24] days and is not encashable.

6.4 On separation, accumulated earned leave will be encashed as part of full and final settlement based on [basic salary / basic plus dearness allowance] as applicable."

Guidance: some state laws and the OSH Code include provisions on carrying forward and encashing earned leave. Make sure lapsing rules do not take away a statutory entitlement. The salary base for encashment is a payroll question, so align it with your payroll team.

Section 7: Compensatory Off, Loss of Pay and Leave During Notice

"7.1 An employee required to work on a weekly off or holiday with prior approval will be granted one compensatory off, to be availed within [60] days.

7.2 Absence without approved leave, or leave taken beyond available balance, will be treated as loss of pay.

7.3 Employees serving notice may avail sick and casual leave. Earned leave during notice requires approval and may extend the last working day at the company's discretion.

7.4 Unauthorised absence for more than [8] consecutive days without communication will be handled under the company's absence and disciplinary procedure."

Guidance: be careful with clause 7.4. "Deemed abandonment" clauses need a fair process, including written notices to the employee's last known address, before any action is taken.

Section 8: Special Leave and Policy Administration

"8.1 Maternity, adoption and other statutory leave will be granted as per applicable law. Details are set out in Annexure [A].

8.2 Special leave, such as leave for marriage, exams or volunteering, may be granted at the discretion of the department head.

8.3 HR will maintain leave records and make balances visible to employees through [the self-service portal].

8.4 This policy will be reviewed annually. The company may amend it with [30] days' notice, without reducing leave already accrued."

Clause 8.4 matters for trust. Never reduce leave that has already been earned when you change a policy.

Mistakes to Avoid When Adapting a Template

• Leaving square brackets or another company's name in the published policy.
• Adopting entitlements below your state minimum because the template number looked reasonable.
• Writing a carry forward cap but forgetting what happens to leave above the cap.
• Not translating the policy for teams who do not read English comfortably.
• Skipping employee acknowledgement. Keep a record that each employee received the policy.

If you are writing a policy for the first time, read our step by step guide on how to create a leave policy for a small company before you finalise numbers.

Frequently Asked Questions

Is this leave policy template legally compliant in every state?

No template can be. State Shops and Establishments Acts and the OSH Code set different minimums. Use the template structure and replace the numbers with figures that meet or exceed the rules where your employees work.

Should the leave year be calendar or financial?

Either works. A calendar year aligns with most holiday lists. A financial year aligns with appraisals and budgets in many Indian companies. Choose one and apply it consistently.

Can we offer unlimited leave instead?

Some companies do, but you still need to meet statutory minimums and track leave for payroll and settlement purposes. Unlimited policies can lead to people taking less leave, so monitor usage.

How should we roll out a new leave policy?

Share it in writing, hold a short session for managers, publish FAQs with worked examples and collect acknowledgements. Migrate balances carefully and tell employees their opening balance before the new rules apply.

Where should the policy be stored?

In your employee handbook and in your HR system so employees can read it alongside their balances.

Turn the Template into Working Rules

Fininvo HRMS lets you set up leave policies with balances, approval workflows, carry forward and encashment rules, comp off and holiday lists, so the clauses above are applied the same way every time. See leave management, browse the HRMS overview or compare plans.