Most small businesses don’t have a leave policy until they need one. Someone asks for a week off, someone else says they were promised more days, and suddenly the founder is settling a dispute over a WhatsApp message from six months ago.
A written leave policy for your small business in India avoids all of that. This guide covers the main types of leave, what Indian law says about them, and a free sample leave policy template you can adapt for your team today.
Why a Leave Policy Matters for Small Businesses
In the early days, leave is usually informal. People ask on WhatsApp, by email or in passing, and the founder keeps track in their head. That works for five people. It stops working quickly after that:
- Managers forget what they approved
- Nobody is sure how many days each person has left
- Employees dispute their remaining balance
- There’s no record if a question comes up later
A documented leave policy fixes this by setting the rules once, in writing. The benefits are simple:
- Clear expectations for employees and managers
- Fewer disputes about leave balances
- Compliance with labour regulations in your state
- A more professional workplace, which helps with hiring too
Types of Leave in India: Legal Guidelines
Indian labour laws set the broad rules for leave, but the exact number of days usually depends on your state’s Shops and Establishments Act. Treat the ranges below as common practice, and check your state’s rules with your CA or HR advisor.
Casual Leave (CL)
Casual leave covers short personal needs such as urgent errands or family matters.
- Typically 8 to 12 days a year
- Usually can’t be carried forward
- Included in almost every small business leave policy
Sick Leave (SL)
Sick leave lets employees take time off when they’re unwell.
- Usually 7 to 12 days a year
- A medical certificate may be required for longer absences
- Smaller organisations often combine it with casual leave
Privilege Leave or Earned Leave (PL/EL)
Earned leave builds up based on the days an employee has worked.
- Typically 15 to 21 days a year
- Can usually be carried forward
- Often capped at 30 to 45 days
Under the Factories Act, eligible workers earn one day of leave for every 20 days worked. You can read more on the Ministry of Labour and Employment website.
Maternity Leave
The Maternity Benefit Act gives women employees paid maternity leave:
- 26 weeks of paid leave for the first two children
- 12 weeks for the third child onwards
- Applies to establishments with 10 or more employees
Paternity Leave
Indian law doesn’t currently require private companies to offer paternity leave, but many do. Five to ten days of paid paternity leave is a common and well-received benefit.
Public Holidays
Every organisation observes the three national holidays: Republic Day (26 January), Independence Day (15 August) and Gandhi Jayanti (2 October). Other holidays depend on your state and local rules.
Sample Leave Policy Template for Small Businesses
Here’s a simple leave policy you can copy and adapt:
Policy effective date: 1 April 2026
Scope: This leave policy applies to all full-time employees.
Leave year: April to March
Leave entitlements:
- Casual leave: 10 days per year
- Sick leave: 8 days per year
- Earned leave: 18 days per year
Accrual: Earned leave accrues monthly based on length of service.
How to apply:
- Submit leave requests through the HR system
- Apply at least 2 days in advance for planned leave
- Inform your manager immediately for emergency leave
Approval: The reporting manager approves all leave requests.
Carry forward: Unused earned leave can be carried forward up to 30 days.
Unpaid leave: Once all balances are used, unpaid leave may be granted with management approval.
How to Track Leave Without Spreadsheets
Most companies start by tracking leave in Excel or Google Sheets. It works until it doesn’t:
- Balances don’t get updated
- Formulas break
- There’s no approval workflow
- Past leave history is hard to find
HR software solves this. EzNxT’s HR management system keeps leave, attendance and employee records together, so balances update automatically and every approval is logged. With EzNxT you can:
- Track leave balances automatically
- Approve requests online or on mobile
- Generate HR reports instantly
- Keep one central employee database
Because unpaid leave and overtime both affect pay, it helps when leave, attendance tracking and payroll share the same data. Learn more about HRMS for small business, or see how it fits into the wider picture in why Indian startup founders need one business management platform.
Frequently Asked Questions
What should a leave policy for a small business in India include?
It should cover the types of leave, the number of days for each, how leave accrues, how to apply, who approves, carry-forward limits and how unpaid leave works.
How many casual leaves should a company provide?
Most small businesses give 8 to 12 days of casual leave a year. Check your state’s Shops and Establishments Act for any minimums.
Can earned leave be carried forward?
Yes. Most companies let earned leave carry forward up to a set limit, commonly around 30 days.
Do small businesses need HR software to manage leave?
Not on day one, but once you have more than a handful of employees, software saves time and avoids disputes. Our list of the best free business software for small businesses in India includes free HR options.