Outlook Business Desk
India has updated its labour laws under the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), bringing uniform leave rules across states and giving workers clearer benefits, including the option to encash leave every year.
The OSH Code came into effect on November 21, 2025, setting a uniform rule that allows employees to carry forward up to 30 days of earned leave to the next year, replacing earlier State-wise variations, though full implementation still depends on States finalising and notifying their rules.
If a worker’s leave exceeds 30 days, they can encash the extra days and also claim encashment of total accumulated leave at year-end, as explained by Tarun Garg, Director at Deloitte India.
The new labour codes, including leave encashment rules, are not fully in force yet as several States are still finalising and notifying their rules, which is required before these provisions can be implemented across the country.
According to Dinkar Sharma, Company Secretary and Partner at Jotwani Associates, before these changes, leave policies were governed by State-specific laws like the Shops and Establishments Acts and the Factories Act, 1948, leading to varied rules, with some States allowing workers to accumulate 45 to 60 days of leave.
The new labour codes introduce a nationwide standard system of earned leave, including one day of leave for every 20 days worked, a 30-day carry forward limit and clearer encashment rules, helping simplify earlier fragmented State-wise regulations, Sharma said.
Leave encashment benefits apply to workers including contract and fixed-term employees under the defined category, but exclude those in managerial or administrative roles and supervisory employees earning more than ₹18,000 per month.
If an employer denies a worker’s leave request, the leave can be carried forward without any limit and later encashed, ensuring workers are not deprived of earned leave benefits, said Minu Dwivedi, Partner at JSA Advocates & Solicitors.