The new Occupational Safety, Health and Working Conditions (OSH) Code introduces significant changes to earned leave policies in India, standardizing entitlements and enhancing worker rights.
New Delhi, India — The recent implementation of the Occupational Safety, Health and Working Conditions (OSH) Code has brought significant changes to how earned leave and encashment are managed for workers across the country. These reforms aim to standardize leave policies, ensuring that employees have clearer rights regarding their leave entitlements. This shift is particularly important as it seeks to provide equitable conditions for all workers, regardless of their location or employment type.
As of November 21, 2025, employees can carry forward up to 30 days of unused leave to the next year and encash any excess beyond this limit. This new provision marks a departure from previous regulations, which varied widely between states, creating confusion and inequity among workers. According to Tarun Garg, Director of Deloitte India, these changes represent a crucial step towards simplifying and rationalizing fragmented state laws.
Prior to this code, leave policies were governed by state-specific laws, causing discrepancies in how leave was accrued and encashed. Some states permitted employees to accumulate 45-60 days of leave, while others had entirely different rules. This lack of uniformity often left workers uncertain about their rights, particularly regarding how much leave they could carry forward or encash. The new code aims to eliminate these inconsistencies by establishing a national framework for leave management.
Standardization of Leave Accrual and Encashment
The OSH Code introduces a uniform accrual rate of one day of leave for every 20 days worked, setting a clear standard for all workers. This change is significant as it simplifies the understanding of leave entitlements for employees across various sectors. Moreover, the maximum carry-forward limit of 30 days ensures that workers are not penalized for not taking leave, promoting a healthier work-life balance.
Under the new regulations, workers can demand encashment of all accumulated leaves at the end of the calendar year, providing them with greater financial flexibility and encouraging them to utilize their leave more effectively.
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Additionally, the code clarifies the rules surrounding leave encashment upon separation from employment. Previously, employees could only encash their leave at the end of their employment, which often led to confusion. Under the new regulations, workers can demand encashment of all accumulated leaves at the end of the calendar year, providing them with greater financial flexibility and encouraging them to utilize their leave more effectively.
This change is particularly beneficial for contract and fixed-term workers, who are now included in the definition of “worker” under the OSH Code. As Ahetesham Ahmed A. Thaver, Associate Partner at ALMT Legal, notes, this inclusion ensures that a broader range of employees benefits from the new leave policies. However, it’s important to note that managerial and administrative staff earning above ₹18,000 per month may not receive these benefits.
Implications for Workers and Employers
Moreover, if an employee applies for leave and the employer denies it, the new provisions allow for those leaves to be carried forward without any cap. This is a significant employee-friendly change, as it prevents employers from arbitrarily rejecting leave requests and ensures that workers have their rights protected.
The implications of these changes extend beyond just the workers. Employers must now adapt their policies to comply with the new regulations, which may require additional resources and training. Companies must ensure that their HR departments are well-versed in the new leave policies to avoid potential legal issues arising from non-compliance. As the labour landscape evolves, businesses that fail to adapt may find themselves at a competitive disadvantage.
Additionally, the standardization of leave policies could lead to increased employee satisfaction and retention. Workers are likely to feel more valued and secure knowing that their leave entitlements are protected under a national framework. This could foster a more positive workplace culture, ultimately benefiting productivity and morale. According to a report by LiveMint, these changes are expected to significantly enhance the overall work environment, as employees will have clearer guidelines and expectations regarding their leave.
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However, the transition to the new code is not without challenges. Many states are still in the process of finalizing their rules, which delays the nationwide implementation of the OSH Code. Until all states have adopted the necessary regulations, the full benefits of the new leave policies may not be realized. This uncertainty could lead to confusion among workers and employers alike, as they navigate the changing landscape of labour laws.
The implications of these changes extend beyond just the workers.
As the OSH Code continues to be rolled out, it will be crucial for both workers and employers to stay informed about their rights and obligations. Open communication and transparency will be key in ensuring a smooth transition to the new leave policies.
This new labour code is a pivotal step in modernizing India’s employment landscape. By establishing clear guidelines for leave accrual and encashment, it aims to protect workers’ rights and promote a healthier work-life balance. The future of work in India is evolving, and these changes reflect a growing recognition of the importance of employee well-being.
The introduction of the new labour code raises questions about how effectively these policies will be implemented across different states. Will all states comply promptly, and how will this affect workers who remain in limbo during the transition? As the labour market adapts to these significant changes, the focus will remain on ensuring that all workers receive their fair share of benefits under the new framework.
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