Quick answer: Earned leave, also called privileged leave or annual leave, is paid leave an employee builds up by working. Under the OSH Code, 2020, a worker who has worked 180 days in a calendar year earns one day for every 20 days worked. Unused days carry forward up to a cap and can be encashed.
- Eligibility fell from 240 to 180 days worked when the OSH Code took effect on 21 November 2025.
- Carry-forward under the OSH Code is capped at 30 days, and leave refused on a valid application carries over without limit.
- In Maharashtra, earned leave can accumulate to 45 days under the Shops and Establishments Act, 2017.
- On resignation or dismissal, unused leave is paid out within two working days.
How do the earned leave rules work in India?
Two laws apply to a typical office, and you follow whichever gives the employee more.
The OSH Code sets the central rule in section 32. Each state’s Shops and Establishments Act adds its own. Pune’s state law still uses 240 days to qualify but lets balances build to 45 days, while the Code uses 180 days and a 30-day carry-forward. So most Pune employers accrue from 180 days and allow 45.
One limit matters. The OSH Code’s leave rules cover “workers”, which excludes managerial staff and supervisors earning over ₹18,000 a month. For those employees, your policy and the state Act set the terms. Most employers give everyone the same leave anyway.
How do you calculate earned leave?
Divide days worked by 20. Simple.
Let’s say a Pune developer joins on 1 January and works 230 days in the year, after weekly offs, holidays and leave. Lay-off days, maternity leave and annual leave taken count toward the 180-day threshold, though they don’t earn fresh leave themselves.
| Step | Figure |
|---|---|
| Days worked in the calendar year | 230 |
| Meets 180-day threshold? | Yes |
| Earned leave credited (230 ÷ 20) | 11.5, usually rounded to 11 or 12 by policy |
| Opening balance next year | 11.5 plus any carry-forward |
Some employers credit monthly instead, at 1.25 or 1.5 days a month. That’s fine if the annual total is at least the statutory figure.
The OSH Code text on India Code also lets the worker demand encashment at the end of the calendar year.
What do foreign employers get wrong about privileged leave?
Three things.
They treat it as “use it or lose it”. Indian law protects carry-forward, so a lapse policy can breach both the Code and the state Act.
They forget the exit payout. Unused balances feed straight into leave encashment at full and final settlement.
And they merge it with casual leave or sick leave into one pot without checking that each statutory minimum is still met. Our piece on simplifying leave policies shows how to combine them safely.
How does Remunance track earned leave for your team?
Remunance runs leave administration as the legal employer. We accrue earned leave under both the OSH Code and the state Act, carry balances forward and encash them at year-end or exit. If an employee disputes a balance, you get our answer within 2 working days. To check whether your current leave policy meets Indian law, ask for a free leave policy review.
What else do people ask about earned leave in India?
Is earned leave the same as privileged leave?
Yes. Earned leave, privileged leave and annual leave are three names for the same paid leave, earned by days worked.
Can earned leave lapse at year-end?
Not below the statutory carry-forward. The OSH Code protects up to 30 days, and Maharashtra lets earned leave build to 45.
Is earned leave paid when an employee resigns?
Yes. Unused earned leave is paid out as part of the final settlement, within two working days of the exit.