New Labour Codes 2026: The central government has introduced a major relief for crores of employees working in both private and government sectors—one that will directly impact their earnings. Often, due to work pressure, employees are unable to use all their leaves, which usually lapse at the end of the year. However, under the new labour codes, employees will now receive cash compensation for unused leaves every year.
What is the New Leave Encashment Rule?
Earlier, employees could typically encash their unused leaves only at the time of retirement or when leaving a job. But under the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, significant changes have been introduced:
- 30-Day Carry Forward Limit: Employees can carry forward a maximum of 30 days of earned leave to the next year.
- Cash for Extra Leaves: If an employee has more than 30 days of unused leave, the employer must pay for the extra days in the same year.
Example:
If you have 45 unused leaves at the end of the year, 30 days will be carried forward, and payment for the remaining 15 days will be given in cash.
Leave Eligibility Now Easier
The new code also simplifies eligibility criteria:
- Earlier, employees had to work at least 240 days in a year to qualify for earned leave.
- Now, this requirement has been reduced to 180 days.
This means employees can start earning and encashing leaves after just 6 months of work.
Full & Final Settlement Within 48 Hours
A major employee-friendly provision ensures that:
- If an employee resigns or is terminated, the employer must complete the full and final settlement within 48 hours.
- Previously, this process often took weeks or even months.
What If Leave Is Denied?
The rules also protect employees in case leave requests are rejected:
- If an employee applies for leave on time but it is denied by management, those leaves will not be counted within the 30-day carry-forward limit.
- Instead, they will be accumulated separately, ensuring the employee does not face any loss.
Experts believe these reforms will not only increase employees’ take-home income but also bring greater transparency and fairness in workplaces.
