🔥 Trending India's Latest Employee Policies: Leave, Insurance, and Benefits

India's employee leave policies and benefits are undergoing significant changes with the introduction of new labor codes, which are expected to consolidate 29 existing labor laws into four comprehensive codes ⁴. These codes aim to create a more unified compliance regime, impacting various aspects of employment, including leave entitlements, working hours, and social security ²⁷. While the exact implementation date has seen some shifts, these codes are anticipated to be effective by November 2025 or early 2026 ⁴⁷.

Overview of the New Labor Codes

The four new labor codes are:

• The Code on Wages ⁴
• The Occupational Safety, Health and Working Conditions Code (OSH Code) ³⁴
• The Code on Social Security ⁴
• The Industrial Relations Code (IR Code) ⁴

These codes introduce substantial reforms that will affect employers, HR teams, payroll professionals, and employees across India ².

Key Changes in Leave Policies

The new labor codes bring several important updates to how leave is accrued, utilized, and encashed.

Earned Leave (EL) / Annual Leave

• Accrual Rate: The OSH Code introduces changes to earned leave policies. While the general principle of earning one day of leave for every 20 days worked remains, there are specific adjustments ³⁶. Employees typically become eligible for earned leave after completing 240 days of service in a calendar year, accruing 15 days of leave ⁸.
• Carry Forward: The maximum number of earned leaves that can be carried forward to the next year is generally capped at 30 days ⁸.
• Encashment: One of the most discussed changes involves leave encashment. The new codes stipulate that employees can encash their earned leave after completing 180 days of service ³. Previously, some state laws required 240 days. The OSH Code allows workers to carry forward a certain number of earned leaves, and if an employee's leave balance exceeds 30 days at the end of the year, the employer may be required to encash the excess leave ³. This means employees could receive payment for their unused leave, potentially impacting their in-hand salary ⁶.

Casual Leave (CL)

• Casual leave is typically granted for unforeseen personal matters or emergencies ⁸.
• The number of casual leaves usually ranges from 7 to 10 days per year ⁸.
• Unlike earned leave, casual leave generally cannot be carried forward to the next year and usually lapses if unused ⁸.

Sick Leave (SL)

• Sick leave is provided for illness or medical conditions ⁸.
• Employees usually need to provide a medical certificate for sick leave exceeding a certain number of days ⁸.
• Similar to casual leave, sick leave often cannot be carried forward and typically lapses at the end of the year ⁸.

Maternity Leave

• India's maternity leave policy is considered one of the most progressive globally ⁹.
• Female employees are entitled to 26 weeks of paid maternity leave for the first two children ¹⁰.
• For subsequent children, the entitlement is 12 weeks ⁸.
• This benefit is available to women who have worked for at least 80 days in the 12 months preceding their expected delivery date ⁸.

Other Types of Leave

• Paternity Leave: While not mandated by central government law, some organizations and state governments offer paternity leave ⁸.
• Bereavement Leave: Some companies provide leave in case of a family member's demise ⁸.
• Compensatory Off: Provided when an employee works on a public holiday or weekend ⁸.
• Public Holidays: Employees are entitled to a certain number of paid public holidays each year, which vary by state ¹⁰.

Changes in Employee Benefits

The new labor codes also bring updates to various employee benefits, aiming to standardize and improve worker welfare.

Working Hours

• The new codes allow for a potential increase in the daily working hour limit from 8 to 12 hours, provided the weekly limit of 48 hours is maintained ⁷. This means a four-day work week could become more common, with employees working longer hours over fewer days ⁷.
• Overtime rules are also being refined, with provisions for increased overtime pay ²⁷.

Social Security

• The Code on Social Security aims to expand social security benefits to a wider range of workers, including gig workers and platform workers, who were previously largely excluded ⁴.
• Mandatory benefits like Provident Fund (PF), Employee State Insurance (ESI), and Gratuity continue to be crucial ¹⁰.
• Provident Fund (PF): Both employer and employee contribute 12% of the basic salary to the PF ¹⁰.
• Employee State Insurance (ESI): This provides medical benefits. Employers contribute 3.25% of the employee's wages, while employees contribute 0.75% ¹⁰.
• Gratuity: Employees are eligible for gratuity after completing five years of continuous service ¹⁰.

Health and Safety

• The OSH Code focuses on improving working conditions, safety standards, and health benefits across sectors ⁷. This includes provisions for better workplace environments and reduced occupational hazards ⁷.

Compliance and Policy

• Employers are now required to have a clear, written leave policy that outlines the types of leave, eligibility criteria, approval processes, and tracking mechanisms ¹. This ensures transparency and compliance with the new legal framework ¹⁵.
• The new codes emphasize a unified compliance regime, reducing the fragmentation of state-specific rules ².

It is crucial for businesses and employees to stay informed about these changes as the new labor codes are implemented, as they will significantly reshape the employment landscape in India.