What is Earned Leave? | Meaning & Definition
Table of Contents
What is Earned Leave (EL)?
Earned leave (EL) or Casual leave (CL) is a type of paid time off that employees earn based on the days they have worked. It allows employees to take a break from work while also receiving their regular salary. There are specific rules on the calculation of earned leave, which also vary depending on company policies and local labor laws.
Earned leave accrual is calculated based on a certain number of days for each employee’s work. The most common accrual rate is one day of earned leave for every 20 workdays. Earned leave (EL) or Privilege leave (PL) is used by employees for various reasons, like vacations or attending to personal matters.
Unused earned leaves can be carried forward to the next financial year, or employees can choose to encash the remaining balance. It is worth noting that Indian labor law does mandate earned leave; however, to drive employee loyalty, companies can provide additional leave to their employees as a benefit.
What are the Benefits of Earned Leave?
Maintaining a healthy balance between work and personal life has become a priority for the employees of the next generation. Employee benefits play a major role in meeting this urban need. Earned leave (EL) is an important benefit that helps boost employee morale. Other benefits include:
Improve Employee Retention
Employers can appreciate their workers’ efforts and dedication by offering leave benefits. This leads to higher job satisfaction and lower turnover rates. It helps the company keep its talent and build a loyal workforce. Employees focus on an organization’s leave policies when looking at job opportunities.
Boost Employee Morale
When employees receive paid leave, they feel valued. This leads to a more loyal workforce. By offering regular pay during these leaves, companies demonstrate that they appreciate their hard work and commitment. Employees who benefit from this support are often more productive.
Effective Competition in the Indian Job Market
Paid time off can attract top talent and retain employees in a competitive job market. This is especially important in a country like India, where many people struggle to find a healthy balance between work and personal life. Employees often work long hours and may not have enough time to rest. Providing paid leave gives them a chance to relax and recharge. This can help them be more productive and focused when they return to work.
Improve Employee Well-Being
Employees use these leaves to take time off to rest. Doing this helps them work more attentively and with more energy when they come back to work. It also benefits the company by increasing productivity and improving employees’ overall well-being.
Regulate Absenteeism
When employees are not provided with earned leave, they are more likely to call in sick or be repeatedly late to work. When the leave schedule is planned in advance, it gives managers time to proactively manage workload without disrupting workflow. This helps companies reduce unplanned absenteeism and improve operational efficiency.
Less Tension and Fatigue
Providing employees with leave where their pay is not deducted can directly contribute to reduced tensions and fatigue. The time away from work can be used to address personal needs, enabling individuals to manage stress and achieve a better work-life balance.
How is Earned Leave Accrued or Calculated?
The calculation of earned leave can vary based on company policy and labor laws. The process can be undertaken, taking into consideration the following:
- Employers need to calculate the total number of working days in a year.
- The total number of working days should be divided by the total number of working days required to earn one day of leave. (mostly 20 days)
- If an employee is joining in mid-year, their earned leave is calculated on a pro-rata basis. (based on 2/3 of the total number of office days)
- Organizations should regularly review their leave policies and labor laws to stay updated on any changes that may be applicable.
To understand how earned leave is accrued, an example is taken into consideration.
An employee works 264 days a year (holidays and weekends are excluded). According to the law, an employee earns one day of leave for every 20 working days. The leave would be 13.2 days (264/20 = 13.2).
Common Types of Earned Leave and Related Leaves
Every company has an extensive list of employee benefits. This may include vacation leave for personal employees and career growth. The types of leave available to staff members are listed below.
Annual Leave
Annual leave is granted to workers based on their length of service. It allows workers to take time off for personal reasons, for example, family trips. The number of annual leaves varies depending on the employee’s experience and seniority.
Sick Leave
This leave is given in addition to the annual leave. Employees can use it to take time off for illness or injury, or medical appointments. Sick leave accrues based on employees’ length of service and can be used as needed.
Sympathy Leave
Employees can take sympathy leave in the event of a family emergency or bereavement. This leave allows employees to attend to family matters, like funerals or hospital visits. Sympathy leave can be taken as and when needed, subject to management’s approval and discretion.
Vacation Leave
Employees are also given vacation leave for private holidays or trips. Vacation leave is available year-round and requires approval from the employer before use. Employees need time off to rest and recharge emotionally and physically.
Parental Leave
This is a form of leave given to an employee for the period required for childbirth or adoption. New parents can use this leave around the time their baby is born or adopted. It helps them care for their newborn and handle family-related issues.
Personal Leave
Family care leave, as well as other types such as maternity or paternity leave, can also be part of paid leave, depending on company policies. Employees can use it to care for sick or injured family members who need help. The administration must approve the leave, but employees are permitted to take it when needed.
Here is a table comparing various leave types, along with their purposes and features.
| Leave Type | Purpose | Typical Duration | Key Features |
|---|---|---|---|
| Annual Leave | It is intended for rest and personal activities, such as holidays. | 2-4 weeks/year |
|
| Sick Leave | Taken at the time of illness or injury. It is also meant for attending medical appointments. | Variable, 7-15 days/year |
|
| Sympathy Leave | It is for family emergencies and the death of loved ones. | 2–5 days/occasion |
|
| Vacation Leave | These are for rest and travel purposes. | 2-4 weeks/year |
|
| Parental leave | Required in times of birth or adoption of a child. | A few weeks to several months |
|
| Personal Leave | It is intended for addressing personal matters that are not covered by other types of leave. | Variable |
|
Earned Leave Eligibility and Entitlement
The eligibility criteria and entitlement of earned leave (EL) in India depend mainly on the type of employment. In almost every company, an employee’s EL accrues after completing 240 days of work with the same employer.
For temporary and contractual employees, EL is offered on a pro-rata basis and according to the terms mentioned in the employment contract.
For Government Employees
- For the central and state governments, employees are entitled to 30 days of EL or 2.5 days for every month of service.
- The leave balance is credited at the beginning of each year.
- The unused leaves are carried forward to the following year, where, for central government employees, the limit is up to a maximum of 300 days, and for state government employees, it is up to a maximum of 180 days.
- Earned leave calculation for temporary government employees is based on a pro-rata basis.
Private Sector Employees
- For private sector employees, the leave entitlement is variable, typically ranging from 12 to 30 days per year.
- It is either 1 day of EL for 20 days of work completed or 2.5 days of EL for a completed month.
- Employees on a probation period may not have EL balances.
- The unused leaves can be carried forward to a fixed limit of 30-60 days or even 120 days in some companies.
- For employees on a notice period or in the event of retirement, the encashment of EL is based on company policy and other applicable rules.
Sector-Specific Provisions
- There are other sector-specific rules for workers. For example, surface mine workers are offered 1 EL for 20 days worked, and underground mine workers are offered 1 EL for 15 days of work.
- This leave is offered to workers only after they have worked for at least 240 days (on the surface) or 180 days (underground) in a given year.
What is the Policy on Earned Leave?
Purpose
This policy aims to enable employees to take time off work, reflect, and rejuvenate themselves, thereby returning to their personal lives and achieving a productive work-life balance.
Subject
This policy applies to all permanent full-time and part-time employees of this organization.
Modifications
The company has the absolute right to modify this policy without notice. The company will develop guidelines for expected working behavior, with a focus on maintaining high employee morale. This includes ensuring satisfaction, commitment, and productivity without disrupting business operations.
How to Apply for Leave?
Even though earned leave is an employee’s right, there is a standard procedure to follow during the application process. It includes proper documentation and approval from the higher authority, as mentioned in the organization’s policy.
Submit a Written Request
It is important to notify the manager ahead of time about any upcoming leaves. This helps them manage operations smoothly. A leave application is a formal request. When submitted, it should include the following:
- Leave dates (start and return dates)
- Reason for leave
- The person responsible for managing the work during the absence
Granting or Denial of Leave
The manager evaluates the leave application once it is submitted. The evaluation is based on the company’s leave policy and the amount of workload.
Employees are granted leave within 7 days of submitting the application. This decision is based on factors like:
- The necessity or urgency of the leave
- Checking eligibility criteria and leave balance
- In case of rejection, managers are requested to provide constructive feedback and alternative leave dates
EL Usage & Carry-Forward
Employees’ unused leave balance can be carried forward to the next financial year. Most companies allow employees to carry forward up to 10 days of EL. Employees can:
- Keep track of leave balance regularly through an ESS portal or leave management systems.
- Apply for carry-forward of leaves if it is mentioned in the leave policy.
Returning from Leave and Adapting to Changes
Employees are expected to return to work on the date specified. It is essential to:
- Communicate delays, if any, to the manager
- Get updates and catch up on pending tasks with teammates
Conclusion
To sum up, earned leave is essential for appreciating workers’ hard work and commitment, thereby making it easier to retain them. When employers grant privileged leave, they demonstrate concern for employee welfare, which may result in higher job satisfaction, lower attrition rates, and increased productivity.
Additionally, leave management software helps employers manage employee leaves effectively. It prevents disruptions to the workflow due to employee absences and simplifies the approval workflow.
factoHR’s leave management module enables organizations to manage employees’ leave of absence effectively. All the leave requests can be streamlined with automated workflows and a mobile app. Schedule a demo now to know more!
Frequently Asked Questions
How does Earned Leave Impact Payroll?
It is generally paid at the employee’s regular rate of pay. Payroll should account for these leave days to ensure employees are paid correctly during their absence.
What is the Difference Between Privilege Leave and Paid Leave?
It refers to time off that employees accumulate over time based on their service or performance. Paid leave is a broader term that encompasses any leave where the employee continues to receive their regular pay, including earned leave, vacation leave, and sick leave.
How do You Manage Privilege Leave Hours for the Employees of a Company?
The best method is to track privilege leave hours through the HR system. This automatically calculates the hours an employee has accrued based on their hire date, job title, and pay frequency.
Can Earned Leave be Encashed?
Employees can encash their earned leave balance through the encashment process. It can be during the employee’s employment, upon retirement, or resignation. It is dependent on the company’s leave policy and labor laws.
What Happens to EL on Employee Resignation?
The unused earned leave is paid out to employees when they submit their resignation. This process is known as leave encashment, where the employee receives payment for the remaining leave days they did not take during their employment.
What is the Rule for Earned Leave?
One common rule for earned leave is that employees accrue one day of earned leave for every 20 working days. It is an employee benefit that allows employees to take paid time off. All the unused leaves can be carried forward to the next financial year or encashed upon request.
Modify your HR and payroll tasks with factoHR today
Let your HR and workforce focus on most important business decisions while factoHR can reduce the burden of daily activities of the organization.
© 2025 Copyright factoHR