Disallow carry forward of earned leaves


Is it possible that a company can decide to disallow any carry forward of earned leaves at all to the next year, and also refuse to encash them?


The Earned Leave is governed by the Shops and Commercial Establishments Act of every State. The total number of this leave vary from state to state.

As per Karnataka Shops and establishments, the employee can carry forward the accumulated earned leaves up to a maximum of forty five days to the next year. Any earned leave accumulated more than 45 days will lapse.

The accumulated leave encashment will be on the prevailing rates of wages as on the date of encashment. The
employers have to make the required changes in their internal leave policy. If the employer is providing a better leave accumulation policy, there is no restriction to it.

Karnataka-shops-and-commercial-establishments-(second-amendment)-act-2020.pdf (3.5 MB)

@Bhuvana_Anand Thanks for the content


Hi @Anushree

As said by @amiths these leaves are governed by the law and they come under the basic principle of employee rights.

Example: In a year up to 45 can be carried forward which is maximum. But 20 working day equals 1 day of leave which is the bare minimum to be given to employees.

let’s say as per 20=1 formula an employee gets 18 leaves in a year, then this 18 cannot be lapsed as they are the minimum given.

But if you give 24 in a year for employees and you want to lapse 6 fulfilling the 18 condition you can make the internal policy accordingly.

Overall any leaves given beyond 18 can be customised and complete lapse of leaves are not allowed.


Please can someone share their Leave Policy document, which I can use a reference to document one for my company.
Thank you

Kind Regards


No it is not wise to frame a company policy to disallow earned leave carry forward as this can be considered as a clear violation of Shops Act, Karnataka. For other states, we have to refer respective rules.

So I think it is better to look at the issue from a win - win solution perspective. Employer wanted to have productivity and employee wanted to enjoy vacation. So put some checks and balances to streamline the leave usage and if the organization wishes to discourage too much accumulation and encashment, introduce best practices so that employees avail maximum earned leave .


Hi @A984SCE

I may not be able to share the exact document at this moment, but alternatively we have created a leave policy webpage, where you pick and choose while drafting one.

Link: https://www.greythr.com/leave-management/ultimate-guide-to-leave-management/nk:


Thank you, it will surely help kick-start the documentation process.