Indian employees expect distinct leave types — casual leave, sick leave, earned leave (also called 'privilege leave'). The 'unlimited PTO' that some US tech companies offer is uncommon in India and viewed with suspicion (employees fear retaliation for using it). The structured Indian model works better.
Standard Indian leave types
| Leave type | Typical annual quota | Carry-forward? | Encashable? |
|---|---|---|---|
| Casual Leave (CL) | 8-12 days | No (use it or lose it) | No |
| Sick Leave (SL) | 10-12 days | No or limited carry | No |
| Earned Leave (EL / Privilege Leave / PL) | 15-21 days | Yes (typically up to 45-60 days) | Yes at exit |
| Maternity Leave | 26 weeks | — | — |
| Paternity Leave | 5-15 days (varies by company) | — | — |
| Marriage Leave | 5-7 days (varies) | — | — |
| Bereavement Leave | 3-5 days | — | — |
| Compensatory Off (Comp-off) | Earned for working on holidays / weekends | Limited carry | Sometimes |
| Loss of Pay (LOP) | Unlimited but unpaid | — | — |
Statutory minimums
- Shops & Establishments Act of each state — typically 12-21 days earned leave per year minimum.
- Factories Act 1948 — applies to factories; 1 day for every 20 days worked = ~12 days/year EL.
- Maternity Benefit Act 2017 — 26 weeks paid maternity leave (mandatory).
- Code on Wages 2019 / Code on Social Security 2020 — broader frameworks consolidating these.
- PoSH-related leave — paid leave during investigation if needed.
State-calibrated leave policy by your consultant
FastLegal's payroll consultant configures your leave policy per state to meet statutory minimums and your competitive positioning. The policy syncs into our leave-management module so employees can see balances and apply through self-service. Compliant and operationally clean.
Competitive positioning for foreign employers
Standard foreign-employer offering that closes Bengaluru senior offers in 2026:
- Casual Leave — 12 days/year, use-it-or-lose-it.
- Sick Leave — 12 days/year.
- Earned Leave — 18-21 days/year, carry-forward up to 45-60 days, encashable at exit.
- Maternity Leave — 26 weeks (statutory), with optional top-up at full pay.
- Paternity Leave — 15 days (competitive), 30 days at progressive employers.
- Bereavement — 5 days.
- Marriage — 5 days, once-in-tenure.
- Wellness day — 1 floating day/quarter, no questions asked.
- Sabbatical — eligible after 5 years, up to 3 months unpaid (rare but valued).
Global team considerations
- Don't apply US 'PTO' bucket to Indian team — Indian engineers want named leave categories.
- Indian employees take more total days off than US norms (festivals + family events).
- Holiday calendar is separate from leave — public holidays don't deduct leave balance.
- Time-zone-aware planning — Indian engineer's leave can affect overlap window; communicate upstream.
- Plan around major festivals — Diwali week, Christmas / New Year, Pongal / Sankranti, Eid.
Leave encashment at exit
Earned Leave accumulated at exit is encashed at the employee's last drawn daily Basic salary. Tax treatment under Section 10(10AA):
- On retirement — exempt up to ₹25 lakhs (recently increased).
- On resignation — exempt up to the prescribed cap (the lower of various measures).
- Excess is taxable as salary at slab rate.
- Lifetime exemption — once used, can't be claimed again from other employers.
Accounting for leave liability
Accrued leave that's encashable creates a liability on the balance sheet. Provisioning required under Ind AS 19. For most foreign-owned tech subsidiaries:
- Monthly accrual: (Annual EL quota / 12) × Daily Basic × Headcount.
- Reversed at exit (encashment paid).
- Reversed at use (no liability for leave already taken).
- Actuarial valuation typically annual — actuary computes present value of liability based on attrition assumptions.
Frequently asked questions
Can we offer unlimited PTO?+
Possible but rare in India. Indian engineers view it skeptically — fear of retaliation for taking too much. Most foreign employers stick to structured categories.
What's the actual paternity leave norm?+
Statutory: none (Maternity Benefit Act covers maternity only). Market: 5-15 days standard, 30 days at progressive foreign employers.
Are public holidays included in the leave quota?+
No — public holidays are separate paid days off. They don't deduct leave balance.
Can we customise leave per employee?+
Yes — within statutory minimums. Most employers run uniform policy across band / level for fairness.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.