How to design a leave policy and run it without spreadsheets
Casual, sick, earned, comp off - what to offer, how accrual and carry forward work, and the approval flow that keeps balances correct all year.
A leave policy has two jobs: to be fair, and to be easy to apply. Most problems come from the second one. When balances live in a spreadsheet that one person updates, employees cannot see what they have, managers approve leave that does not exist, and the year ends with a long list of corrections.
Step 1: choose your leave types
| Type | Typical yearly quota | Notes |
|---|---|---|
| Casual leave (CL) | 6 to 12 days | For short personal needs. Usually not carried forward. |
| Sick leave (SL) | 6 to 12 days | Ask for a medical certificate only beyond 2 or 3 consecutive days. |
| Earned / privilege leave (EL/PL) | 12 to 18 days | Usually accrues monthly, can be carried forward and encashed. |
| Comp off | Earned | Credited for approved work on a holiday or weekly off. Set an expiry. |
| Maternity / paternity | As per law and policy | Maternity benefit follows the Maternity Benefit Act where it applies. |
Your state's Shops and Establishments Act or the Factories Act sets minimum entitlements for many businesses. Check the one that applies to you before you finalise numbers.
Step 2: decide how leave is earned
- Upfront: the full quota on day one of the year. Simple, but a new joiner in March gets a full year's leave.
- Monthly accrual: one-twelfth each month (1.25 days for a 15-day quota). Fairer, and the standard for earned leave.
- Pro-rata for joiners: new employees get leave in proportion to the months left in the year.
Step 3: set carry forward and encashment
Cap carry forward (for example, 30 days of earned leave) so balances do not grow forever. Decide whether leave above the cap lapses or is encashed, and on what pay - basic only, or basic plus DA - and write it down.
Step 4: align it to your financial year
Most Indian companies run leave from April to March, the same as payroll. Whatever you choose, use the same year for balances, accrual and encashment, or the numbers will never agree.
Step 5: the approval flow
- The employee applies from their phone and sees their balance before submitting.
- The reporting manager approves or rejects with a remark - or HR does, if you prefer.
- The balance updates the moment it is approved, and the day shows as leave in attendance, so it is never counted as an absence.
- Cancelled leave returns to the balance automatically.
Common mistakes to avoid
- Allowing negative balances "just this once" - it becomes the rule.
- Different leave years for leave and payroll.
- No probation rule. Many companies allow only casual or sick leave until confirmation.
- Holidays that are not in the system, so a long weekend shows up as absences.
Get these five steps right and leave becomes something employees handle themselves, with HR only stepping in for exceptions.