At Wisemonk, we’ve helped global employers navigate India’s leave policies, balancing compliance with employee well-being. Below, we clarify the legal nuances of carrying forward unused leave and the status of sabbaticals under Indian law, including recent updates (as of 2025).
1. Carrying Forward Unused Leave in India
A. Statutory Framework for Leave Carryforward
Under India’s labor laws, earned leave (EL) or privilege leave can be carried forward, but rules vary by state and industry. Key regulations include:
- Factories Act, 1948: Allows carry forward of up to 30 days of EL.
- Occupational Safety, Health, and Working Conditions (OSH) Code, 2020: Mandates that unused leave exceeding 30 days must be encashed annually (Section 32(vii)).
- State-Specific Shops and Establishments Acts: Govern carry forward limits for non-factory employees (see Table 1).
Example:
An employee in Karnataka accrues 18 days of EL but uses only 10 days. They can carry forward 8 days (subject to the 30-day cap).
Table 1: State-Wise Carry forward Limits (2025)
B. Encashment Rules Under OSH Code, 2020
- Mandatory Encashment: Employers must encash EL exceeding 30 days at the end of each calendar year.
- Formula:
- Encashment = ((Basic + DA)/26) × Excess Leave Days
Example:
An employee earning ₹60,000/month (Basic + DA) with 40 days of EL:
Encashment= (60,000/26)×10 = ₹23,077
C. Exclusions
- Casual/Sick Leave: Cannot be carried forward.
- Maternity Leave: Fully utilized during the entitlement period.
2. Sabbaticals in India: Legal Status and Practices
A. Legal Framework
India lacks federal legislation mandating sabbaticals. However, organizations may offer them voluntarily under:
- Employment Contracts: Custom policies for senior employees or academic staff.
- Industry Norms: Common in IT, education, and research sectors (e.g., Infosys offers 6–12 months for skill development).
Example: A Bengaluru-based tech company permits a 3-month sabbatical for employees with 5+ years of service.
B. Key Considerations for Employers
- Eligibility: Typically requires 3–5 years of service.
- Compensation: Unpaid or partially paid (varies by policy).
- Job Security: Employees must return to the same or equivalent role.
Case Study:
A Mumbai-based university grants professors 1-year sabbaticals for research, with 50% salary retention.
3. Compliance Challenges
A. Leave Management
- State Variations: Karnataka’s 30-day carryforward vs. Maharashtra’s 45-day limit.
- Documentation: Maintaining leave registers for 3+ years as per OSH Code.
- Penalties: Fines up to ₹50,000 for non-compliance with encashment rules.
B. Sabbatical Risks
- Misuse: Employees may not return post-sabbatical.
- Workload Redistribution: Requires temporary hiring or team adjustments.
4. Recent Updates (2025)
- Digital Compliance: Mandatory e-filing of leave records for firms with 100+ employees.
- Gig Workers: Proposed inclusion under OSH Code for leave encashment.
- Flexible Sabbaticals: Startups like Zomato now offer "career breaks" of 6–12 months.
5. How Wisemonk Simplifies Leave and Sabbatical Management
We help global employers navigate India’s leave policies through:
- Automated Tracking: Real-time leave accruals and carryforward limits aligned with state laws.
- Encashment Compliance: Auto-calculate and disburse payments per OSH Code requirements.
- Policy Design: Draft sabbatical frameworks that balance employee needs and operational continuity.
- Audit Support: Ensure adherence to Shops Act and Factories Act during inspections.