Why Accrued Leave Is Not the Same as Earned Leave

Accrued leave is the leave a person has built up and not yet taken. That is what the phrase means in practice, and it is worth knowing that the phrase is not in the Code.

What surprised me reading the Code is that earned leave is in there as a phrase, seven times over. Six of them are about two specific jobs, and the seventh points straight at those six.

The leave the rest of your staff build up sits in a different section, at a different rate.

This page sets out what the Code gives, at what rate, and what happens to leave that nobody used.

What Accrued Leave Means

The entitlement sits in section 32(1) of the Occupational Safety, Health and Working Conditions Code, 2020, the OSH Code for short. It says every worker in an establishment is entitled to leave in a calendar year with wages.

Read that phrase again, because it is the Code’s own name for the thing. Not accrued leave, not earned leave, not privilege leave. The phrase is leave in a calendar year with wages.

The Code also says worker where most businesses say employee, and it defines the word itself. This page follows the Code where the entitlement is being quoted, because the rate attaches to that word.

Section 2 defines an establishment by headcount for most workplaces, and brings in a mine, a port or the vicinity of a port where dock work is carried out whatever the headcount.

Where the Code does not reach, and in a state with its own shops and establishments rules, the entitlement can come from a different instrument with different numbers.

That is the entitlement. Who has to track it, and in what, is the other half of the problem.

Accrued Leave vs Earned Leave

Here is the part that trips people up. Earned leave is a real term in the OSH Code. It appears seven times. Six of them sit inside section 25(3), and the seventh is in the rule-making powers, pointing straight back at it.

That subsection is about sales promotion employees and working journalists. For them the Code grants earned leave on full wages, if requested for, of not less than one-eleventh of the period spent on duty.

Why the Difference Matters

One-eleventh of duty is a more generous rate than one day per twenty worked. So the phrase your leave register probably uses belongs to a provision that most of your staff are not covered by.

Nothing breaks if an IT services firm in Hyderabad uses the label earned leave in the software. What matters is which rate the balance is built at, and which section you would point to if somebody asked.

The Two Provisions Side by Side

So the question is not which phrase your register uses. It is which section the balance was built under, and at which of the two rates.

How Accrued Leave Builds Up

Two numbers do the work: a gate, and a rate.

The gate is section 32(1)(i): the worker must have worked one hundred and eighty days or more in the calendar year before the leave can be taken. The rate is section 32(1)(ii): one day of leave for every twenty days of work.

Take a textile mill in Coimbatore. Suppose a worker put in 220 days over the calendar year. At one day per twenty, 220/20 gives 11 days of leave with wages for that year. The earned leave calculator works that out from a day count.

Two groups accrue faster. An adolescent worker earns a day for every fifteen, and so does a worker employed below ground in a mine.

What Counts Toward the 180 Days

This is the clause that catches people out. Under section 32(1)(iii), a period of layoff, maternity leave or annual leave already taken counts toward the 180 days.

But the same clause says the worker shall not earn leave for the period so counted. So those days help a person through the gate and build no balance of their own.

One more clause sits here. Under section 32(1)(iv), a holiday falling between the leave days somebody takes is excluded from the leave period, so it is not counted against the balance. The sandwich leave policy guide covers how that plays out in practice.

A mid-year joiner is handled separately. Section 32(1)(v) gives them the same rate for working one-fourth of the days left in the year. So a diagnostic lab chain hiring in October still owes leave for that year.

Accrued Leave You Did Not Take

Section 32(1)(vii) carries unused leave into the next year, and caps what can carry at thirty days.

Then it adds the line almost nobody quotes. A worker who applied for leave with wages and was not given it may carry that refused leave forward without any limit.

The Cap Does Not Apply to Refused Leave

The thirty-day cap is the rule, and refused leave is its carve-out. The difference is whether a request was made. Leave nobody asked for is capped at thirty days. Leave somebody asked for and did not get is not capped at all.

Which makes the approval record the thing worth keeping. A supermarket that declines leave in its busiest fortnight and keeps no trace of the request has no way to show which balance was capped.

Encashment sits beside this. Under section 32(1)(viii) the worker is entitled on demand to encash leave at the end of the calendar year, and under 32(1)(ix) to encash whatever exceeds the thirty days.

Accrued Leave When Someone Leaves

Section 32(1)(vi) covers the exit, and it is more generous than the rest of the section.

Where a worker is discharged, dismissed, quits, retires on superannuation or dies in service, the worker or their heir is entitled to wages in lieu of the leave the worker had built up. That holds even if the 180 days was never worked.

The Code also sets when. A discharge, dismissal or resignation has to be paid before the end of the second working day, and a retirement or death within two months.

Two working days is a short clock, and it applies to the leave component specifically rather than to the whole settlement.

What that pay is calculated on comes from the Code’s own definition of wages at section 2, which is the same wording the Code on Wages, 2019 uses.

Your Accrued Leave Checklist

Most leave disputes I have seen are not about the rate. They are about a balance nobody could explain, in a register that changed definition somewhere along the way.

Six Things to Check This Quarter

1. Write down the accrual rate your register uses, and the section it comes from.
2. Check whether your state’s shops and establishments rules set something different from the Code’s floor.
3. Confirm that layoff and maternity days count toward the 180 but earn no balance of their own.
4. Keep the approval trail for refused leave, because that balance is not capped at thirty days.
5. Set the mid-year joiner rule, so somebody hired in October is not silently given nothing.
6. Put the exit payout on a two-working-day clock for the leave component.

The policy document is where all of this has to land. How to prepare a leave policy format covers the structure, and sick leave in India covers the type people confuse this one with.

All of this has been in force since the four labour codes took effect on 21 November 2025.

If you want accrued leave worked out from one rule you set once, how Attendo works is the short version, and attendohr.com is the place to start.

Frequently Asked Questions