Simplifying Leave Policies for a Balanced Workforce

In my conversations with clients about leave policies, it often surprises them how nuanced and employee-centric these policies can be in India. When we start discussing earned leaves, especially in the context of team members working under the EOR model, clients often ask questions around holidays and how leave is managed. Holidays, though significant and unique to India, I have covered under different experience narration so I’m limiting this narration around earned leaves, encashment, carryforward, and the policies regulating these aspects.

Earned leave in India is largely governed by labor laws, which mandate that employees are entitled to one leave day for every 20 days of work. The number of leaves forms the backbone of most leave policies, but it’s just the beginning. A significant part of the discussion is the carryforward of leaves, encashment of the same and the administrative aspect of the policy. 

Many companies allow employees to carry forward a portion of their earned leaves into the next year, but any excess beyond that limit often lapses. However, it’s important to clarify that while unused leaves may lapse due to company policy at year-end, government regulations mandate that all accrued earned leaves must be encashed upon the employee’s exit from the company. This ensures fairness to the employee and prevents potential liabilities from accumulating.

Leave encashment becomes crucial, especially for employees who may have accumulated significant balances over time. Balancing between carryforward limits and encashment provisions helps companies avoid financial strain while ensuring transparency in their leave policies.

An equally important administrative consideration is when earned leaves are credited. Some companies credit them at the beginning of the year, while others opt for monthly, quarterly, or annual crediting systems. I suggest quarterly crediton as it reduces the administrative burdon to just 4 times the year and also makes it simple to credit 4 leaves than the fractional leaves every month. It also lets employees utilize the leaves sooner than waiting for the year end. Additionally, a pro-rata system is one more suggestion for new joiners, where leaves are credited based on the employee’s start date. This ensures fair entitlement throughout the year.

Another crucial point is whether employees are entitled to leaves during their training or probation periods. Many companies do not grant paid leaves during these initial phases, only crediting earned leaves once the probation period is successfully completed. This means that employees may not be entitled to any paid time off during their probation or training, which is a policy that needs to be clearly communicated to avoid confusion or dissatisfaction later on.

Key administrative aspect clients must consider is the minimum and maximum number of leaves an employee can take at once. While minimum leave durations are typically half a day, companies often impose a cap on how many earned leave days can be taken consecutively, depending on business needs. It’s vital that companies maintain clarity on the application and approval process. 

Employees need to know when their leaves are credited, how they can apply, and when they can expect approvals. Without these details, employees might unknowingly take unpaid leaves due to process delays or ambiguities—something that can significantly impact morale.

Some companies also adopt clear guidelines for granting exceptional leaves in case of medical emergencies. Though there cannot be a strict policy mandating extra leaves for such cases, providing managerial staff with clear guidelines to approve exceptions can be a good practice. This ensures compassion and flexibility in the company’s approach, which is highly valued by employees in times of personal crises.

One practice that can be especially frustrating for employees is overly complicated leave policies. For example, in some companies, if an employee takes leave that “sandwiches” a weekend or holiday—such as taking leave from Monday to Friday—the weekend days are also counted as leave. This effectively turns a five-day leave into nine, which can be unfair and difficult to manage. Such policies, though seemingly minor, can create dissatisfaction among employees and administrative confusion for HR departments. Keeping policies simple and straightforward is key to maintaining both employee satisfaction and administrative efficiency.

Ultimately, I encourage discussions, and reasoning around all these points as the clear thinking make the policy robust and impartial. A well-balanced policy acknowledges that leaves are not just procedural, but an essential part of an employee’s well-being. Respecting the fact that employees need to take breaks to maintain a healthy work-life balance is key. A fair and thoughtful leave policy ensures employees feel valued while making it easier for companies to administer, creating a harmonious work environment for all.