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
- 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.
Accrual rules
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
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.
Approval workflow
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
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.
Put this into production today
WappBlaster Attendance Suite ships everything above on simple tiers: attendance from ₹2,100/year (7 staff), field from ₹180/user/month, with all modules on one subscription. See pricing · See the product · start free trial · glossary.