Leave Policy Template for Startups in India (2026)
Leave Policy Template for Startups in India (2026)
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A good leave policy template answers five questions in one page: how much leave people get, how it builds up, what happens to unused days, who approves it, and which days are holidays. For an Indian startup in 2026, it also has to sit within two layers of law: the new labour codes, and your state's Shops and Establishments Act.
Who this is for: founders and first HR or operations hires writing the company's first leave policy in India.
The two layers of law to check first
The labour codes. All four labour codes came into force on 21 November 2025. Annual leave sits in the Occupational Safety, Health and Working Conditions Code (the OSH Code), Section 32. It applies to establishments with 10 or more workers. The main rules:
- A worker becomes entitled to annual leave after working 180 days in a calendar year.
- Leave builds up at one day for every 20 days worked.
- Unused leave can be carried forward up to 30 days. Leave you refused when someone asked for it carries forward without a cap.
- Workers can ask to encash leave, and accrued leave is paid on exit.
Your state's Shops and Establishments Act. These still apply alongside the codes, with their own numbers. Karnataka, for example, provides 18 days of earned leave, 12 days of sick leave and a carry-forward cap of 45 days. Other states differ. Follow whichever rule is more generous to the employee.
Kinds of leave to include
| Kind | What the law says | What most startups do |
|---|---|---|
| Earned or annual leave | OSH Code: 1 day per 20 days worked after 180 days; state law may set more | 15 to 18 days a year, building up monthly |
| Casual leave | Set by state law, where it exists | 6 to 8 days a year, no carry-forward |
| Sick leave | Set by state law, where it exists | 6 to 12 days a year; a doctor's note after 2 or 3 days in a row |
| Maternity leave | Social Security Code: up to 26 weeks; 12 weeks for women with two or more surviving children; 12 weeks for adopting and commissioning mothers | As the law says, often with a phased return |
| Paternity leave | Not required for private companies | 5 to 10 working days |
| Bereavement leave | Not required | 3 to 5 days |
| Holidays | State law sets national and festival holidays | A published list each January, often with a few optional holidays |
To qualify for maternity benefit, a woman needs to have worked at least 80 days in the 12 months before the expected delivery date.
Carry-forward and encashment
This is where most disputes start. Write down:
- The carry-forward cap, for example "up to 30 days of earned leave; anything above lapses on 31 March, unless leave was refused."
- Encashment during the year: whether people can encash, and how much.
- Encashment on exit: accrued earned leave is paid in the final settlement, within two working days of a resignation or dismissal under the Code on Wages. See our full and final settlement checklist.
- What lapses: casual and sick leave usually lapse at year end.
Example: an employee with a monthly basic salary of ₹60,000 leaves with 12 days of earned leave. If your policy pays leave on basic pay over 26 working days, the encashment is ₹60,000 ÷ 26 × 12 = ₹27,692. Write the formula into the policy so nobody argues about it later. Check with your CA which wage components it should be calculated on under the new wage definition.
Approvals and holidays
- Who approves: the person's manager. The founder approves the manager's leave.
- Notice: two weeks for planned leave of more than three days. Sick leave, as soon as possible on the day.
- Replies: within two working days, or the leave counts as approved.
- Refusing leave: only for a real business reason. Refused leave carries forward.
- Holidays: publish the list each January, with your state's required national and festival holidays and two or three optional ones.
The template
Copy this into your policy and fill the blanks:
- Who it covers: all employees on the payroll of [company], from their joining date.
- Leave year: [1 January to 31 December / 1 April to 31 March].
- Earned leave: [] days a year, building up at [] days per month. Can be used after [__] months.
- Casual leave: [__] days a year. Lapses at year end.
- Sick leave: [] days a year. Doctor's note after [] days in a row.
- Maternity, paternity and adoption leave: as above.
- Carry-forward: up to [__] days of earned leave.
- Encashment: [rule during the year], and on exit as per law.
- Approvals: manager approves; reply within [__] working days.
- Notice: [__] for planned leave.
- Holidays: list published each [month]; [__] optional holidays.
- Where to apply and check balances: [tool or email].
Common mistakes
- Copying a big company's policy. It will cite old laws and promise things you can't run at 15 people.
- No carry-forward cap. Balances grow for years, and so does the bill when people leave.
- Ignoring your state. The codes are national, but your state's numbers may be higher.
- Leave tracked in a spreadsheet nobody updates. Balances drift, and every exit becomes an argument.
Free download
Editable leave policy
With blanks for your state, numbers and approvers.
Word document, 12 KB
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Questions people ask
How many days of leave must a startup give in India?
It depends on your state's Shops and Establishments law and, for establishments with 10 or more workers, the OSH Code. The Code gives annual leave of one day for every 20 days worked once someone has worked 180 days in the year. Most startups give more: often 15 to 24 days of paid leave in total, plus holidays.
Can unused leave be carried forward?
Under the OSH Code, unused annual leave can be carried forward up to 30 days, and leave you refused when someone asked for it carries forward without a limit. Your state law may set its own cap. Write your carry-forward cap clearly in the policy, and match it to the stricter rule.
Do I have to pay for unused leave when someone leaves?
Yes, for accrued annual leave. Under the labour codes, wages for leave earned but not taken are paid on exit. For resignation or dismissal, wages due are payable within two working days of the last day. Casual and sick leave usually lapse unless your policy says otherwise.
Is paternity leave mandatory for private companies?
There is no general legal requirement for private companies in India to give paternity leave. Many startups offer one to two weeks anyway, because it costs little and matters a lot to the people who use it. If you offer it, write the number of days and how to apply in the policy.
Sources
- Acuity Law: FAQs on the OSH Code, 2020 and OSH (Central) Rules, 2026 (opens in a new tab)
- King Stubb & Kasiva: All four labour codes enforced from 21 November 2025 (opens in a new tab)
- King Stubb & Kasiva: Maternity benefits under India's labour codes, 2026 (opens in a new tab)
- Simpliance: Leave and working hours, Karnataka (opens in a new tab)
This is general information, not legal advice. Check with your lawyer or HR adviser for your company's situation.