Summary of this article
Earned leave carry-forward capped at 30 days
Mandatory leave encashment beyond threshold
Eligibility reduced to 180 working days
Indian labour laws are undergoing a structural shift with the implementation of the Occupational Safety, Health, and Working Conditions (OSH&WC) Code of 2020. It is among the most significant changes that are being revised. Governance rules of earned leaves, carry-forwards and encashment are some areas under consideration as millions of workers and employers are dependent on them across the country.
At the core of the reforms is the government’s attempt to standardise the leave policies in the country. These segments were previously fragmented across various industries and were loosely set into motion for the workers. With the new framework, which came into effect in November 2025, companies are required to align their policies with the uniform and employee-centric structure.
Changes Under The OSH&WC
One of the key changes under this code is the capping of carry-forward of the earned leaves. Workers can now only forward a maximum of 30 days of unused leave to the next calendar year. Any leaves beyond this threshold will not be added indefinitely. This is effective in ending the practice of building up large balances of leaves over time.
Additionally, the rules include an important safeguard for employees. If a worker applies for leave and the employer denies this request, those leaves can be carried forward without any capping. This ensures that employees do not lose out on their rightful time off due to any managerial constraints.
Another reform introduced is the leave encashment norms. Under the new rules, employers are required to compensate employees for unused leave beyond the 30-day threshold. This is introduced typically at the end of the year. This makes encashment mandatory for leaves in certain scenarios. This ensures that excess leave does not lapse without any compensation. This also applies to when the contract of the employee is over, be it due to resignation, retirement or termination. This reinforces the idea that the earned leave is an entitlement and not just a benefit.
Furthermore, the reform lowers the eligibility threshold for earned leave. Employees can now qualify for annual leave after working for 180 days in a year. Earlier, the mark for this was 240 days. This change is beneficial for contract and gig workers who face such disadvantages in employment.
These rules apply primarily to workers as defined by the Code, which includes factory workers, contract labour, migrant workers, and certain categories of supervisors under specified wage limits. For organisational systems, these rules will require adjustments; companies will need to update HR policies, payroll systems, and leave tracking mechanisms for overall compliance.
The leave framework is a shift in India’s labour law systems. By clearly stating how leave is earned, carried forward, and monetised, OSH&WC aims to improve transparency and promote a healthy work-life balance.
