Leave Policies — Accrual, Carry-Over & Limits

A leave policy defines how employees earn leave, how much they can accumulate, and what happens to unused leave at the end of the year. While leave categories define the types of leave, leave policies define the rules that govern each type.

This chapter covers creating leave policies, configuring accrual methods, setting carry-over rules, assigning policies to employees, and managing custom time-off settings.

What You Will Learn

• How leave policies relate to leave categories
• How to create a new leave policy
• The three accrual types: monthly credit, annual credit, and manual
• How to set maximum accumulation limits
• How carry-over and lapse rules work
• How to assign policies to individual employees or groups
• Custom time-off configuration (partial-day leave)
• Past leave restriction settings
• How to edit and manage existing policies

Prerequisites

Required: Leave categories must be configured before you can create leave policies. See Chapter 21: Setting Up Leave Categories. You must have an Administrator or HR Manager role.

Understanding the Leave Policy Model

A leave policy in Udyamo HRMS connects a leave category to a set of rules:

One leave category can have multiple policies. For example, you might have two Casual Leave policies — one for probationary employees (6 days/year) and another for confirmed employees (12 days/year).

Creating a New Leave Policy

To create a leave policy:

1. Navigate to Settings > Leaves & Attendance > Leave Policies.
2. Click Add Leave Policy.
3. Fill in the policy details as described below.
4. Click Save.

Policy Configuration Fields

Accrual Types

The accrual type determines when and how leave days are credited to employee balances. Udyamo HRMS supports three accrual methods.

Monthly Credit

Leave days are credited to the employee's balance at the beginning (or end) of each calendar month.

Example: If the accrual amount is set to 1.5 days/month for Privilege Leave, an employee accumulates 1.5 days each month, totaling 18 days over a full year.

When to use: Monthly accrual is ideal for Privilege Leave / Earned Leave, where the employee "earns" leave progressively. This is also the most common method for organizations that want to prevent employees from using their full annual entitlement in the first month.

Annual Credit

The full entitlement for the year is credited at the beginning of the fiscal year in a single lump sum.

Example: If the accrual amount is 12 days/year for Casual Leave, all 12 days are available from Day 1 of the fiscal year.

When to use: Annual credit is suitable for Casual Leave and Sick Leave, where the full balance is typically available immediately. This is the simpler method and works well for organizations with straightforward leave policies.

Manual Credit

Leave is not automatically accrued. An administrator must manually credit days to employee balances.

When to use: Manual credit is appropriate for:

• Compensatory Off (CO) — credited when an employee works on a holiday.
• Special leave grants — one-time credits for extraordinary circumstances.
• Organizations with complex or irregular accrual rules not covered by the standard monthly/annual methods.

Tip: For most organizations, use Annual Credit for Casual Leave and Sick Leave, and Monthly Credit for Privilege/Earned Leave. Reserve Manual Credit for Compensatory Off and ad-hoc grants.

Pro-Rata Accrual for Mid-Year Joiners

When an employee joins mid-year, the accrual is automatically calculated on a pro-rata basis:

Pro-rata annual entitlement = (Annual accrual amount / 12) x Remaining months in the fiscal year

For monthly accrual, the system simply starts crediting from the month in which the employee joins.

Example (Annual Credit): An employee joins on August 15. The Casual Leave policy has an annual credit of 12 days. The fiscal year starts in April.

• Remaining months: August through March = 8 months
• Pro-rata entitlement: (12 / 12) x 8 = 8 days

Maximum Accumulation Limits

The Maximum Accumulation field caps the total number of leave days an employee can hold at any time for a given category. Once the cap is reached, further accruals stop until the employee consumes some leave.

Example: If Privilege Leave accrues at 1.5 days/month with a maximum accumulation of 30 days, an employee who has not taken any PL will stop accumulating after 20 months (30 days reached). They will resume accumulating only after they consume some leave and their balance drops below 30.

Warning: If you set a maximum accumulation limit, clearly communicate this to employees. Unused leave that exceeds the cap is effectively lost. Encourage employees to use their leave regularly.

Carry-Over Rules

Carry-over settings determine what happens to unused leave at the end of the fiscal year.

Carry-Over Amount

The Carry-Over Amount specifies the maximum number of unused days that transfer to the next fiscal year. Any unused days beyond this limit lapse and are forfeited.

Carry-Over Scenarios

No Carry-Over (Lapse All)

If the carry-over amount is set to 0, all unused leave for that category lapses at the end of the fiscal year. The balance resets to zero, and new accruals begin for the next year.

Typical use: Casual Leave and Sick Leave often have a zero carry-over policy.

Unlimited Carry-Over

If the carry-over amount is left blank or set to a very high number, all unused leave is carried forward without any lapse.

Typical use: Privilege Leave / Earned Leave is sometimes allowed to carry forward fully, subject to a maximum accumulation cap.

Tip: The combination of carry-over limits and maximum accumulation limits together controls long-term leave balance growth. Use carry-over to manage year-end behavior and maximum accumulation to set an overall ceiling.

Assigning Policies to Employees

A leave policy does not take effect until it is assigned to employees. Udyamo HRMS uses the LeavePolicyEmployee model to track these assignments.

Assigning During Policy Creation

1. After saving the leave policy, the system may prompt you to assign it to employees.
2. Select the employees or employee groups (by department, designation, or office) who should receive this policy.
3. Click Assign.

Assigning from the Employee Profile

1. Navigate to the employee's profile.
2. Go to the Leave tab.
3. Click Assign Leave Policy.
4. Select the policy from the dropdown for each leave category.
5. Click Save.

Bulk Assignment

1. Navigate to Settings > Leaves & Attendance > Leave Policies.
2. Select the policy you want to assign.
3. Click Assign to Employees.
4. Use the filters (department, designation, office) to select a group of employees.
5. Review the selection and click Assign.

Warning: An employee can have only one active policy per leave category at a time. If you assign a new policy for a category that already has an active assignment, the new policy replaces the previous one from its effective date.

Custom Time-Off Configuration

Udyamo HRMS supports partial-day leave, allowing employees to take leave for a specific number of hours rather than a full or half day. This feature is controlled by the min_custom_time_off_minutes setting.

Configuring Custom Time-Off

1. Navigate to Settings > Leaves & Attendance.
2. Locate the Minimum Custom Time-Off setting.
3. Set the value in minutes (e.g., 60 for a 1-hour minimum, 120 for a 2-hour minimum).
4. Click Save.

How Custom Time-Off Works

When an employee applies for custom time-off, they specify the number of hours. The system converts these hours to a fraction of a day based on the employee's shift duration and deducts accordingly from the leave balance.

Example: An employee on an 8-hour shift takes 4 hours of custom time-off for Casual Leave. The system deducts 0.5 days from their CL balance.

Tip: Custom time-off is useful for organizations with flexible schedules or those that allow employees to attend short appointments without taking a full half-day off.

Past Leave Restrictions

The past_leave_enabled setting controls whether employees can apply for leave on dates that have already passed.

Configuration

1. Navigate to Settings > Leaves & Attendance.
2. Locate the Allow Past Leaves setting.
3. Toggle the setting on or off.
4. Click Save.

Behavior

Warning: Disabling past leaves prevents employees from regularizing unplanned absences after the fact. If you disable this setting, ensure your managers have a process to handle retroactive leave requests on behalf of employees.

Policy Effective Dates

Each leave policy has an Effective From date and an optional Effective To date.

• Effective From: The date from which the policy begins crediting leave and governing balances. Leave requests before this date are not affected by this policy.
• Effective To: The date on which the policy stops being active. Leave blank for an open-ended policy.

Transitioning Between Policies

When you need to change leave entitlements (e.g., increasing CL from 10 to 12 days for the next fiscal year):

1. Set the Effective To date on the current policy to the last day of the current fiscal year.
2. Create a new policy with the updated entitlements and set its Effective From date to the first day of the next fiscal year.
3. Assign the new policy to the relevant employees.

This ensures a clean transition with full audit history.

Editing Existing Policies

To modify a leave policy:

1. Navigate to Settings > Leaves & Attendance > Leave Policies.
2. Click on the policy name to open it.
3. Update the desired fields.
4. Click Save.

Safe vs. Impactful Changes

Warning: Modifying an active policy affects all employees currently assigned to it. If you need different rules for a subset of employees, create a new policy rather than modifying the existing one.

Sample Policy Configurations

The following table provides typical configurations for common leave categories in Indian organizations:

Best Practices

1. Name policies clearly. Include the category name and the target employee group in the policy name (e.g., "CL Policy — Probation" vs. "CL Policy — Confirmed").
2. Document your accrual rules. Maintain an internal reference document that maps each category to its policy rules, so HR staff can answer employee queries consistently.
3. Review policies annually. At the start of each fiscal year, review and update policies to reflect any changes in company guidelines or labor law amendments.
4. Test with a small group first. When creating a new policy, assign it to a few test employees and verify that accruals, balances, and carry-over behave as expected before rolling it out organization-wide.
5. Communicate changes to employees. Whenever you change leave entitlements, send an announcement (see Chapter 42: Announcements & Notifications) so employees are aware.

What Comes Next

With leave categories and policies configured, the next step is to set up your organization's holiday calendar. Proceed to Chapter 23: Holidays.