Let’s see all three possible ways to handle this
- Carry forward: If employees prefer to take their leave and if your operations can accommodate it, carrying forward the leave can be a good option.
- Encashment: If carrying forward is not feasible or if employees would benefit more from financial compensation, encashment is a suitable alternative.
- Lapse: If your organization is unable to find 1 and 2 viable, this is the last resort - i.e lapse it at the end of the year. However this may discourage employees to come for work on holidays/week offs, next time (without coercion)
Handling accrued compensatory leave involves several considerations, including company policy, legal requirements, etc. Mostly labour legislations are silent regarding lapse/encashment of comp offs.
I recommend option 2 with some gamification (provide enough opportunity for employee to avail comp off balances with in some pre-defined time limit, put conditions like only 75% can be encashed etc.)
Here is an earlier detailed response for a similar topic