Earned leave, and the three rules that must be in writing
Leave that accrues with service — where the accrual method, the carry-forward cap and the encashment basis matter more than the headline entitlement.
What it is
Leave accruing with service — often one day per twenty worked in factories, or a flat monthly credit in offices.
Carry-forward
Usually capped. Once the cap is reached, further accrual stops until the balance is drawn down.
The trap
Accrual, cap and encashment basis left to verbal policy. Every dispute at exit starts there.
Earned leave accrues with service — commonly one day per twenty days worked in factory settings, or a flat monthly credit in offices. Unused leave typically carries forward up to a cap, and may be encashed at exit or annually, depending on policy and applicable state rules.
How it works in practice
At 1.25 days a month with a 45-day carry-forward cap, an employee who never takes leave stops accruing once the cap is reached.
What to watch for
Accrual method, carry-forward cap and encashment basis must be stated in writing; verbal policy is where disputes start.
How Klok handles it
Klok runs accrual, capping and encashment as policy per grade, and the balance the employee sees is the balance payroll uses.
Earned leave (EL / privilege leave) FAQs
Is earned leave encashment compulsory?
On exit, accumulated earned leave is generally payable, and several state enactments require it. During service it is a policy choice. Either way the encashment basis — basic, or gross — must be stated.
Can we cap the carry-forward?
Yes, and most employers do. State the cap and what happens on reaching it: whether accrual pauses or the excess lapses. Silence here is read against the employer.
Does earned leave accrue during loss of pay?
Typically not, since accrual is tied to days actually worked. This is exactly the kind of interaction that must be configured once and applied to everyone, rather than decided per case.
Can we cap how much earned leave carries forward?
Within what the applicable Act permits, yes — but the cap has to be in the policy and applied consistently. Refusing carry-forward that was never capped in writing is where disputes start.
Does earned leave accrue during unpaid absence?
Accrual is usually tied to days actually worked, so a long unpaid absence affects it. Ordinary paid leave does not, and netting it off by instinct produces a balance nobody can defend.
Must we allow leave when the employee wants it?
Scheduling can be managed for business reasons, but a blanket refusal that causes leave to lapse is a different matter. Lapsed leave the employee was never allowed to take rarely holds up.
Stop calculating this by hand
Klok computes it from your own attendance and salary data, every month, with the working shown.