If you have completed six months at your current job, there is some genuinely good news waiting for you. Under the New Labour Code 2025, the eligibility threshold for earned leave has been brought down significantly, meaning millions of workers across India who were earlier left out of the leave benefit system can now formally claim their earned leave. This is one of the most worker-friendly changes in recent Indian labour law history.
The New Labour Code 2025 also introduces a structured annual leave encashment framework, allowing eligible workers to convert unused earned leave into monetary compensation every year. This article covers everything you need to know: who qualifies, how many leaves you earn, how encashment works, and what changes from the old system. Whether you are a private sector employee, a contractual worker, or a factory floor worker, these rules affect you directly.
Earned Leave After 6 Months – What the New Labour Code 2025 Says
Under the old law, specifically the Factories Act 1948 and the Shops and Establishments Acts, workers typically had to complete 240 days of work in a calendar year before becoming eligible for earned leave. That effectively meant you had to work almost a full year before getting any leave credit. The New Labour Code 2025 changes this entirely.
Now, if you have worked for at least 180 days (roughly six months) in a year, you are entitled to earned leave. For every 20 days worked, you earn one day of paid leave. So a worker who puts in 240 days of work will earn 12 days of paid earned leave annually. That may sound modest, but combined with the new encashment rules, it adds real financial value for workers who had no such benefit before.
| Key Detail | Information |
| Policy Name | New Labour Code 2025 (Code on Social Security & Occupational Safety) |
| Focus Keyword | Earned Leave After 6 Months New Labour Code 2025 |
| Minimum Work Days for EligibIlity | 180 days earned leave for every 20 days worked |
| Leave Accural Rate | 1 day earned leave for every 20 days worked |
| Maximum Leave Carry Forward | 30 days per year |
| Annual Encashment Allowed | Yes, once per year |
| Applicable To | Factory workers, contract workers, private sector emplyees |
| Previous Threshold | 240 days under Factories Act 1948 |
| Official Reference | Ministry of Labour and Employment, Government of India |
How Earned Leave Accrual Works Under the New System
The calculation is straightforward once you understand the formula. For every 20 days of actual work, you accumulate one day of earned leave. If you worked for 180 days in a year, that translates to 9 days of earned leave. Work 220 days? You get 11 days. A full year of 240 working days gives you 12 earned leave days.
Worth knowing is that days counted toward leave eligibility include days of actual work, national and festival holidays, and authorised leave already availed during the year. Absences without authorisation, layoffs, or periods of lockout are not counted. This distinction matters when you are tracking whether you have crossed the 180-day mark.
Annual Encashment of Earned Leave – A Major New Benefit
One of the most significant additions under the New Labour Code 2025 is the provision for annual leave encashment. Under the previous framework, leave encashment was largely limited to the time of resignation or retirement. Workers who accumulated leave but did not avail it simply lost the benefit or had to wait until they left the organisation.
That changes now. Workers can encash their unused earned leave once every year. The encashment is calculated based on the basic wage of the worker. Importantly, the maximum carry-forward limit has been set at 30 days, which means any leave beyond that threshold must either be availed or encashed. This prevents employers from indefinitely deferring the financial obligation while also encouraging workers to take actual rest.
Who Benefits Most From These Changes
The reduction in eligibility threshold from 240 days to 180 days is a landmark change for contract workers, gig workers on longer-term contracts, and seasonal employees. These categories of workers often do not complete a full year at a single employer, which previously disqualified them entirely from earned leave benefits.
Migrant workers are another group that stands to gain substantially. Many migrant workers move between states and employers within a calendar year. Under the earlier rules, this movement disqualified them at every step. Under the new framework, any job lasting six months or more now qualifies for earned leave. That said, the implementation will depend on how State governments adopt and notify these codes, since labour is a concurrent subject under the Constitution of India.
Difference Between Old Rules and New Labour Code 2025
| Aspect | Old Law vs New Labour Code 2025 |
| Eligibility Threshold | 240 working days (old) vs 180 working days (new) |
| Leave Accrual | 1 day per 20 days worked (unchanged) |
| Carry Forward Limit | Varied by state vs 30 days uniform cap (new) |
| Annual Encashment | Not university available (old) vs Allowed once per year (new) |
| Encashment on Exit | Allowed (old) vs Still allowed (new) |
| Scope | Industry/sector Specific (old) vs Broader coverage across sectors (new) |
How to Claim Your Earned Leave or Encashment
Claiming earned leave under the new system follows a simple process. Most organisations maintain a leave management portal or HR system where you can apply directly. If your employer does not yet have a formal system, a written application to your HR department is the standard route.
Here is what you need to know about the process:
- Check your leave balance through your HR portal or payslip
- Confirm you have completed 180 days of work in the current year
- Submit a leave application or encashment request to your HR department
- For encashment, request in writing mentioning the number of leave days to be encashed
- Encashment amount will be credited as part of your salary or as a separate payment
- Keep a copy of the application and acknowledgement for your records
If your employer refuses or delays a legitimate earned leave or encashment request, you can file a complaint with the State Labour Commissioner. Under the new Labour Codes, a simplified dispute resolution process through tribunals is also being put in place.
Important Points to Keep in Mind
•
The four Labour Codes, including the one governing leave, are already passed by Parliament but implementation depends on State-level notification. Most major states are in advanced stages of adoption as of 2025.
Encashment is taxable income under the Income Tax Act. However, leave encashment at the time of retirement from government service enjoys full tax exemption. Private sector employees get a partial exemption.
Workers in establishments with fewer than 10 employees may be governed by different rules under the Shops and Establishments Act of their respective state.
Earned leave is separate from casual leave and sick leave. These are different categories and each has its own rules.
If you resign or are terminated, your employer is legally required to encash all pending earned leave at the time of full and final settlement.
FAQs
Q1. I have been working for 7 months at my current company. Am I eligible for earned leave under the New Labour Code 2025?
Yes. Since you have crossed the 180-day threshold, you are eligible. Your earned leave will be calculated at the rate of 1 day for every 20 days worked.
Q2. How many earned leave days will I get if I worked for exactly 180 days?
Working 180 days means you earn 9 days of paid earned leave. The formula is 180 divided by 20, which equals 9.
Q3. Can I carry forward unused earned leave to the next year?
Yes, but only up to 30 days. Any earned leave beyond 30 days that is not availed must either be encashed annually or it will lapse, depending on the employer’s policy within the legal framework.
Q4. Is annual leave encashment mandatory, or can my employer refuse it?
Under the New Labour Code 2025, annual encashment is a legal entitlement once it is notified by the State. Employers cannot refuse a valid encashment request. If they do, you can escalate to the labour authority.
Q5. What is the difference between earned leave and casual leave?
Earned leave accumulates based on days worked and can be carried forward or encashed. Casual leave is typically granted for short unplanned absences, does not accumulate, and cannot be encashed. Both are counted separately in your leave balance.
Q6. When exactly will the New Labour Code 2025 come fully into effect?
The four Labour Codes are already enacted at the central level. Implementation is happening in phases as individual states notify the rules. As of 2025, many states including Uttar Pradesh, Madhya Pradesh, and others have already begun the notification process.
Important Links
| Purpose | Link |
| New Labour Code 2025 Official Notification | Visit Here |
| Ministry of Labour and Employment Official Website | Visit Here |
| Our Homepage | Visit Here |
