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New Labour Law Mandates Companies to pay unused leaves for their employees!

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New Labour Law Mandates Companies to pay unused leaves for their employees!

A lot of changes are in store for employees and employers as four new labour laws are awaiting implementation. 

Some of the important changes/areas of impact will be:

(1)   Lower take-home pay,

(2)   higher contribution to the Employees’ Provident Fund (EPF) account,

(3)   calculation of the number of paid leaves available in a calendar year and

(4)   maximum working hours in a week


New Labour Law Regarding Unused Leaves

One of the labour laws – the Occupational Safety, Health and Working Conditions Code (OSH code) – states that an employee cannot accumulate more than 30 days of paid leave in a calendar year. If the accumulated paid leave due to an employee exceeds 30 days in a calendar year, the company (employer) will have to pay for the excess leave. In this case, ’employee’ means those workers who are not in managerial or supervisory positions.

Here it is important to note that the Occupational Safety, Health and Working Conditions Code, the Code on Wages, Industrial Relations Code and the Social Security Code are awaiting a government notification for the date from when these new laws will be effective, as per news report.

The new four labour laws have been passed by the parliament and notified by the government. They are only awaiting an effective date from which laws will come into effect.


What is the opinion of the Experts!

As per the report, experts say the new rule will do away with the system of unused leave getting lapsed beyond a certain limit. 

“As per the Occupational Safety, Health and Working Conditions Code, 2020, if the leave balance exceeds 30, the worker will be entitled to encash the excess leave. Such leave encashment will be done at the end of each calendar year. The annual leave for workers cannot lapse under the labour codes and will have to be availed or carried forward or encashed. Currently, many organisations do not allow leave encashment on an annual basis as well as for the paid leave balance to exceed the carry forward limit.

So, to avoid paying an employee/worker for unused ‘paid leaves’ exceeding 30 days in a year, employers may ask workers to go on vacation i.e., utilise the excess ‘paid leave’. 


Proprietary blog of Karma Global

Collated and Compiled by the internal staff of Karma Global  with the knowledge and expertise that they possess,  besides adaptation, illustration, derivation, transformation, collection and auto generation for its monthly newsletter Issue 15  of  September   2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – /


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