Leave Encashment Calculator Under the New Labour Code (OSH Code 2020)
How is leave encashment calculated under the new labour code?
Under section 32 of the OSH Code 2020, a worker who has worked 180 days in the calendar year earns one day for every 20 days worked (one per 15 for adolescents and below-ground mine workers). Up to 30 days carry forward; days above 30 can be encashed, and the worker can ask to encash leave at the end of the year. On leaving, all leave due is paid, within two working days of resignation, discharge or dismissal. Encashment = days x daily wage.
The new Labour Codes cut the wait for annual leave from 240 days to 180, capped carry-forward at 30 days and gave workers the right to encash leave above it. Most leave encashment calculators online still use the old rules.
Enter the days worked, leave taken and carried forward, and the wage; the calculator applies section 32 of the OSH Code and shows the working.
Built by Muhammad Shahzeb Anwar, MSc Industrial and Organizational Psychology. Built from the text of section 32 of the OSH Code 2020, read from the Gazette copy.
Your leave year
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The rules in section 32
A worker is entitled to leave in a calendar year if they have worked 180 days or more in it. Lay-off, maternity leave and annual leave taken count toward the 180 days but do not earn leave. Someone who joins after 1 January qualifies by working one-fourth of the days left in the year. Leave accrues at one day per 20 days of work. Holidays falling inside a period of leave are not counted as leave. Up to 30 days carry forward to the next year; leave the worker asked for and was refused carries forward without limit. The worker can demand encashment at the end of the year, and can encash any days above 30.
On resignation, discharge or dismissal, wages for all the leave due must be paid before the end of the second working day, even if the worker had not yet reached 180 days. On superannuation or death the payment is due within two months.
Which wage, and divided by what
The Code says leave is paid but does not fix the wage base or the daily divisor. Most advisers use the Code on Wages definition of "wages" (basic pay, dearness allowance and retaining allowance, with excluded allowances added back above 50% of pay), but the Code on Wages also says HRA, conveyance and overtime count as wages for payment of wages, so the right base is still debated. Dividing the monthly wage by 26 (working days) gives a higher daily rate than dividing by 30. Use the base and divisor in your policy or settlement; the calculator lets you choose.
Tax is separate: for non-government employees, leave encashment on retirement or resignation is exempt up to a lifetime limit of Rs 25 lakh under section 10(10AA) of the Income-tax Act; encashment while in service is taxable.
What this will not tell you
Section 32 covers 'workers' in establishments under the OSH Code (10 or more workers); managers and supervisors earning over Rs 18,000 a month are outside it unless your State or contract extends it, and a more generous State Shops and Establishments Act, award or contract applies to that extent. The Code does not say how to treat a fraction of a day or which daily divisor to use, so both are your choice here. Nothing you type leaves your browser.
Questions people actually ask
How many days do I need to work for annual leave under the new labour code?
180 days in the calendar year, down from 240 under the Factories Act. Lay-off, maternity leave and leave taken count toward the 180.
How many leave days can be carried forward?
Up to 30 days. Leave you applied for and were refused carries forward without any limit.
Can I encash my leave every year?
Section 32 lets a worker demand encashment at the end of the calendar year, and encash days above the 30-day carry-forward cap.
When must leave encashment be paid when I resign?
Before the end of the second working day after you leave. On superannuation or death, within two months.
Is leave encashment paid if I leave before 180 days?
Yes. On leaving, wages are paid for the leave earned even if you had not yet worked the 180 days needed to take it.
Is the daily rate monthly salary divided by 26 or 30?
The Code does not say. Many employers divide by 26 working days, some by 30; check your policy or standing orders.
Sources
Section 32 was read on 17 October 2026 from the Gazette copy hosted by PRS Legislative Research. If the official text differs, the official text wins.
- Occupational Safety, Health and Working Conditions Code 2020, section 32 (Gazette copy, PRS): https://prsindia.org/files/bills_acts/acts_parliament/2020/Occupational%20Safety,%20Health%20And%20Working%20Conditions%20Code,%202020.pdf
- Code on Wages 2019, section 2(y) definition of wages (Bill text, PRS): https://prsindia.org/files/bills_acts/bills_parliament/2019/Code%20on%20Wages,%202019.pdf
- PIB press release, 21 November 2025: the four Labour Codes made effective: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2192463
- Ministry FAQs on the four Labour Codes (SCC Online summary): https://www.scconline.com/blog/post/2026/04/26/ministry-faqs-four-labour-codes-india-2026/
Cite this tool
Free to use and free to quote. If a figure here is useful in something you are writing, a link back is all that is asked.
Muhammad Shahzeb Anwar, MSc Industrial and Organizational Psychology. Leave Encashment Calculator: New Labour Code (India). Shahzeb Speaks. https://www.shahzebspeaks.com/leave-encashment-calculator-india/
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