Leave & Policy

Leave Policy Template for India: A Free 2026 Leave Management Reference for SMBs

A leave policy is a rulebook telling employees how many days of each leave type they earn, carry forward, encash and how requests get approved. Free leave policy template for Indian SMBs covering earned leave, casual leave, sick leave, comp-off, accrual, carry-forward and encashment, with sample clauses.

WappBlaster Team Published 16 May 2026 Updated 1 Jun 2026 7 min read

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Leave policy template for India in brief

A leave policy template for India should settle year-end disputes before they start, and the WappBlaster reference covers the four core types SMBs need. Earned leave runs 15 to 30 days a year, accruing monthly, commonly 1.5 days for 18 a year, with carry-forward capped at 30 to 45 days and encashment on exit mandatory under most state shops-and-establishment acts at the per-day basic-pay rate. Casual and sick leave each run 7 to 12 days, granted annually and usually lapsing at year-end. Compensatory off gives one day for each weekly off or holiday worked, used within 90 days. Mid-cycle joiners accrue pro-rata, so someone starting on the 15th gets half that month's accrual. Special leave should be written down too: 26 weeks of maternity leave under the Maternity Benefit Act, plus company-set paternity, bereavement of 3 to 7 days and marriage leave. Requests go to the manager within 48 hours, then HR for longer leave, and the Attendance Suite tracks balances beside payroll.

What should a leave policy for Indian SMBs include?

It should cover earned, casual and sick leave plus compensatory off, with explicit rules for monthly accrual, carry-forward, encashment and approvals, so year-end disputes are settled in advance.

WappBlaster's Attendance Suite tracks leave balances next to attendance and payroll.

  • Earned leave is usually 15 to 30 days a year and encashable on exit.
  • Accrual rules decide how leave builds up month by month.
  • Special leave types need their own clauses beyond the four core ones.

Leave policy template for India benefits

  • Fewer year-end disputes

    Accrual, carry-forward and encashment rules are written down before anyone argues about them.

  • State-compliant minimums

    The template meets the shops-and-establishment requirements of most states.

  • Correct exit settlements

    Unused earned leave is paid at the per-day basic rate in the final settlement.

  • Fair pro-rata accrual

    Joiners and leavers in the middle of a month earn exactly their share.

  • Explicit special leave

    Maternity, bereavement and marriage leave are decided once rather than case by case.

  • Leave that flows into payroll

    Approved leave and any deductions land in the same payroll cycle.

A clean leave policy resolves 80% of year-end leave disputes before they happen. The 2026 default policy for Indian SMBs covers four leave types, earned leave, casual leave, sick leave, compensatory off, with explicit accrual, carry-forward and encashment rules. This guide gives you the reference template.

The four leave types in an Indian leave policy template

  • Earned Leave (EL): 15-30 days/year, accrues monthly (1.25-2.5 days/month), encashable on exit.
  • Casual Leave (CL): 7-12 days/year, granted annually, lapses at year-end.
  • Sick Leave (SL): 7-12 days/year, granted annually, lapses or limited carry-forward.
  • Compensatory Off: 1 day comp-off for each day worked on weekly off / holiday, usable within 90 days.

State-specific shops-and-establishment acts set minimum leave entitlements; the template above meets most state requirements. See the leave accrual entry for the underlying mechanics.

Leave accrual rules for the policy template

EL accrues monthly (most common: 1.5 days/month = 18 days/year). Accrual pauses during unpaid leave (most policies) or continues (some). Pro-rata accrual applies for mid-cycle joiners and exits, joiner on the 15th gets 0.5 × that month's accrual.

Carry-forward + encashment in a leave policy for India

EL carry-forward is typically capped at 30-45 days. Surplus either lapses or moves to year-end encashment at per-day basic-pay rate. CL and SL usually lapse at year-end. Leave encashment on exit is mandatory for EL under most state shops-and-establishment acts.

Leave policy approval workflow in India

Sample workflow: leave application → manager approval (within 48h) → HR review (for leave >5 days or affecting payroll) → decision. WappBlaster's Leave module automates the workflow with WhatsApp + email notifications and same-cycle payroll deduction.

Special leaves to add to the policy template

Maternity (26 weeks under the Maternity Benefit Act), paternity (varies by company policy), bereavement (3-7 days), marriage (3-5 days). These are policy choices but should be explicit in the document to avoid case-by-case decisions.

HR teams also use our leave management software, the leave encashment calculator and the HRA calculator.

Leave policy template for India: leave types, rules and sources
Feature Entitlement Carry-forward or expiry Source
Earned leave 15 to 30 days a year, accrued monthly Capped at 30 to 45 days; encashed on exit State shops-and-establishment acts
Casual leave 7 to 12 days a year Lapses at year-end Company policy within state minimums
Sick leave 7 to 12 days a year Lapses, or limited carry-forward Company policy within state minimums
Compensatory off 1 day per weekly off or holiday worked Use within 90 days Company policy
Maternity leave 26 weeks Stated explicitly in the policy Maternity Benefit Act
Bereavement leave 3 to 7 days Stated explicitly in the policy Company policy
Marriage leave 3 to 5 days Stated explicitly in the policy Company policy

When a leave policy template for India is not the right fit

  • State shop and establishment rules differ, so check your state's provisions or ask a CA before adopting this template unchanged.
  • A company with only a handful of staff may need just a one-page note on paid days off rather than a full leave policy.

Leave Policy Template for India: questions

What is the minimum leave entitlement under Indian law?

State shops-and-establishment acts set minimums. Most states require at least 15 days earned leave per year for adults plus 7 days casual + 7 days sick. Maternity leave is 26 weeks under the central Maternity Benefit Act.

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Is EL encashment mandatory on exit?

Yes, in most Indian states under shops-and-establishment acts. The employer must pay accrued unused EL at per-day basic-pay rate within the final settlement.

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Can CL and SL be carry-forwarded?

Most policies lapse CL and SL at year-end to encourage actual rest use. Some allow limited SL carry-forward for medical reasons. Policy choice, but be explicit in the document.

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How does comp-off accrual work?

One day of comp-off accrues for each day worked on weekly off or company holiday. Usage typically within 90 days; surplus lapses or converts to overtime pay per policy.

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Does the policy need state-by-state customisation?

Yes for groups with multi-state operations. State minimums differ; the policy template should meet the highest-requirement state your group operates in to keep one common document.

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How is the policy enforced in software?

Accrual runs nightly per employee per leave type. Carry-forward and encashment compute on cycle close. Approval workflows route per role with full audit trail. See WappBlaster Leave module.

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Can paternity / bereavement leaves be added?

Yes, custom leave categories with their own accrual, eligibility and approval rules. Common policies add paternity (5-15 days), bereavement (3-7 days), marriage (3-5 days) and study leave for relevant roles.

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How quickly should a manager approve a leave request?

The sample workflow sets manager approval within 48 hours, followed by HR review for leave of 5 days or more or leave that affects payroll.

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How much maternity leave must an Indian SMB give?

26 weeks under the Maternity Benefit Act, so state it explicitly in the policy alongside your other special leave types.

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How is earned leave calculated for someone who joins mid-month?

Pro-rata. A joiner on the 15th gets half of that month's accrual, and the same rule applies in the month someone exits.

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WappBlaster Team

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The WappBlaster team builds attendance, field-tracking, payroll, leave, expense and reports software for 3,500+ India and UAE SMBs.

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