Earned Leave (EL / Privilege Leave)

Statutory accrual rules

For factories, the Factories Act grants an adult worker one day of leave with wages for every 20 days worked in the previous calendar year, provided the worker completed 240 days of work in that year (with pro-rating for those who joined mid-year). Unused leave carries forward, with a cap of 30 days. Days of layoff, maternity leave and earned leave already taken count as days worked for the 240-day test.

Shops, offices and other establishments follow the state Shops and Establishments Act, where earned or privilege leave is typically 12 to 18 days a year with state-specific carry-forward limits. Do not assume a single national number; check the Act for the state where the establishment is registered.

• Factories Act: 1 day per 20 days worked, after 240 days in the year
• Carry-forward cap under the Factories Act: 30 days
• S&E Acts: commonly 12–18 days EL per year, state-specific
• Many companies credit EL monthly or quarterly in advance for simplicity

Accrual mechanics in payroll systems

Companies implement EL either as an annual credit at the start of the leave year, as a monthly accrual (for example 1.25 or 1.5 days a month), or as a true days-worked accrual. Monthly accrual is easiest to administer and makes pro-rating for joiners and leavers straightforward. Whichever method is used, the resulting entitlement must not fall below the statutory minimum for the establishment type.

EL taken on days adjoining weekly offs raises the sandwich question; the policy must say whether the intervening offs are counted as leave.

Encashment and exit

Because EL accrues and carries forward, it builds a balance that becomes a liability. Most policies allow encashment of the balance on exit, and some allow annual encashment above a threshold. Encashment is usually computed as (basic + DA) ÷ 30 × days, or ÷ 26 for wage workers, per the company's stated method. The tax treatment is covered under leave encashment.