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Calculating Annual Leave Entitlements in India

After you have hired employees in India, you will want to know the exact amount of paid annual leave entitlements that are required by statute.  The next step will be calculating the amount of leave due, and how much has been taken by the employee each year.

If the calculations are not correct, this could affect the employee’s leave or any unused amount when the employment is terminated.  This is an area of compliance that may be unfamiliar to you if your home country allows the employer to set the amount of annual leave.

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Annual Leave Entitlements in India

Indian employment law mandates a minimum of 15 days paid annual leave for employees (1.25 days per month of service), but the employer can offer more in the employment contract.  The leave is accrued monthly for employees in service for less than one year.  There are also a number of ‘casual’ leave days allowed and the amount will depend on the Indian state of employment.

Public Holidays in India

In addition to annual leave each employee receives 10 public holidays that are fully paid.

Client Case: Calculating Annual Leave in India

One of our clients with staff in India was trying to calculate the leave for an employee that was being terminated before one year of service.  The client calculated that the employee had taken an excess of seven leave days and wanted to have those refunded to the company via payroll.

Solution:

The clients record showed that the employee had taken 15 leave days in total, but our local partner had recorded the leave taken at 16 days. 

We explained to the client that the employee had earned 8.75 leave days, and in the state of employment was entitled to an additional one day of casual leave for each month of service (8 in this case), for a total of 16.75 days.  Based on that calculation we let them know that there was no negative leave to be refunded, nor any leave pay out to the employee upon termination.

The client had overlooked the ‘casual’ leave entitlement in their calculation, which is easy to do when employing in an unfamiliar country.

Do you need more information about India?

This is a complex system for calculating leave, and you might have additional questions such as:

If there are unused leave days at termination, do those need to be paid out to the employee?

Can ‘casual’ leave days be used for any purpose, such as sickness or family emergencies?

If an employee does not choose to take a public holiday, can they add that to their annual leave amount and take it later?

We offer our clients solutions to problems like this when entering a new country of employment and provide guidance and support in the areas of immigration, payroll, benefits and taxation.  We make international employment simple.

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