Leave policy for a small business in India: a practical template

A written leave policy saves arguments. People know what they're entitled to, managers decide requests the same way, and balances can be explained. This guide covers the decisions to make and gives you a template.

Your state's Shops and Establishments Act (or the Factories Act for factories) sets minimum leave and holiday entitlements, and they differ from state to state. Check the law that applies to your establishment and make sure your policy gives at least that.

Decide these first

Which kinds of leave. Most small businesses have three: casual leave (short, unplanned absences), sick leave and earned or privilege leave (planned time off that builds up over the year). Add others only if you'll use them.

How much, and when it's credited. Either all at once at the start of the year, or built up monthly (accrual). Accrual is fairer for people who join mid-year.

Carry forward and encashment. Can unused earned leave move to next year, and up to how many days? Is any of it paid out when someone leaves?

Half days. Allowing half days avoids people losing a full day for a short appointment.

Approvals. Who approves (usually the reporting manager), who stands in when they're away, and how much notice you expect for planned leave.

Holidays. Publish the holiday calendar for each location at the start of the year.

Statutory leave you must allow

Some leave comes from central law, whatever your policy says. For example, the Maternity Benefit Act, 1961 gives eligible women up to 26 weeks of paid maternity leave for their first two children (12 weeks thereafter). Check which central and state laws apply to your establishment.

Template

1. Scope. This policy applies to all employees of [Company] from [date].

2. Leave year. The leave year runs from [April to March / January to December].

3. Casual leave. [N] days a year, credited [at the start of the year / monthly]. Not carried forward. Up to [N] consecutive days.

4. Sick leave. [N] days a year. A medical certificate is needed for absences of more than [N] consecutive days.

5. Earned leave. [N] days a year, credited monthly. Up to [N] days may be carried forward; [N] days may be encashed on leaving.

6. Half days. Casual and sick leave may be taken as half days.

7. Applying. Apply in [SUTRA / the leave system] [N] days ahead for planned leave, or on the day for unplanned leave. Your reporting manager approves; if they're away, [role] approves.

8. Unapproved absence. Absence without approved leave is treated as unpaid.

9. Holidays. The holiday calendar for each location is published every [month].

10. Changes. HR may correct balances with a recorded reason; employees can see every change to their balance.

How SUTRA helps

In SUTRA you set up each leave type with its entitlement, accrual, half-day and carry-forward rules. Employees apply from their phone, requests go to their reporting manager with a fallback approver, and balances are an append-only ledger, so every credit, use, cancellation and correction can be traced. Approved leave appears on attendance and is counted correctly in payroll. See leave management in SUTRA.