What Is a Standard Leave Policy in Indian Companies?

As organisations grow, one of the earliest and most important HR decisions is defining a clear and fair leave policy. Employees expect clarity, managers expect consistency, and HR teams must ensure compliance with applicable labour laws.

A common question we hear from founders and HR teams is: "Is there a standard leave structure followed by most Indian companies?"

The short answer is: there is no single statutory standard, but there are widely accepted industry practices that most private-sector organisations follow. This article explains those practices and offers guidance on designing a balanced leave policy for Indian companies.

Is There a Legally Mandated Leave Structure?

In India, leave rules are governed primarily by State Shops and Establishments Acts, Factories Acts, and industry-specific regulations. These laws typically mandate:

Minimum Earned / Privilege Leave

Weekly offs

National & festival holidays

However, Casual Leave (CL), Sick Leave (SL), and Restricted Holidays (RH) are not uniformly standardised across states. As a result, companies adopt policies based on industry norms rather than strict legal prescriptions.

Common Leave Types in Indian Companies

Most private-sector organisations use a combination of the following:

1. Earned Leave (EL) / Privilege Leave (PL)

Accrued over time

Can usually be carried forward

Often encashable at exit or year-end (subject to policy)

2. Casual Leave (CL)

Short, planned or unplanned personal leave

Typically not carried forward

3. Sick Leave (SL)

Used for illness or medical needs

Usually non-carry-forward and non-encashable

4. Restricted Holidays (RH)

Optional holidays from a predefined list

Commonly used for regional or cultural observances

A Widely Accepted "Standard" Leave Structure

While practices vary, the following annual leave distribution is very common across Indian SMEs, IT services firms, and startups:

Leave Type	Days per Year
Earned Leave (EL)	12 days
Casual Leave (CL)	6 days
Sick Leave (SL)	6 days
Restricted Holidays (RH)	2 days
Total	26 days

This structure:

Aligns with most state-level expectations

Is familiar to employees

Is easy to administer in payroll and HR systems

Many organisations operate comfortably within a 24–26 day annual leave range, excluding weekly offs and public holidays.

Variations You May See in Practice

There is no "one-size-fits-all" policy. Some variations include:

Startups and modern organisations

Combine CL + SL into a single category (e.g., 12 days)

Use a pooled leave model

Emphasise flexibility over categorisation

Compliance-focused or legacy organisations

Higher EL (15–18 days)

More rigid accrual and carry-forward rules

Role-based differentiation

Different leave rules for factory staff vs office staff

Different policies for probation vs confirmation

All of these approaches are acceptable if clearly documented and consistently applied.

Key Principles of a Good Leave Policy

Regardless of numbers, experienced HR practitioners agree on these fundamentals:

Clarity: Employees should clearly understand entitlements and usage rules

Consistency: Rules must apply uniformly across similar roles

Compliance: State laws must always be respected

Payroll alignment: Leave types should integrate cleanly with LWP and salary calculations

Flexibility: Policies should allow reasonable adjustments as the organisation evolves

Final Thoughts

There is no legally defined "standard" leave policy in India—but there is a strong industry consensus around certain structures. For most organisations, a 12 EL / 6 CL / 6 SL / 2 RH framework offers a safe, familiar, and employee-friendly starting point.

Ultimately, the best leave policy is one that balances employee well-being, operational needs, legal compliance, and is communicated transparently across the organisation.

What Is a Standard Leave Policy in Indian Companies?