Section 32 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020 (the OSH Code) gives every worker in an establishment leave with wages in a calendar year, on conditions. It sets the 180-day qualifying period, the accrual rate, how carry-forward and encashment work, and what is owed when a worker leaves or dies in service.
A worker who has worked 180 days or more in a calendar year earns one day of leave for every 20 days worked (15 days for an adolescent; 15 days for a worker below ground in a mine). Unused leave can be carried forward up to 30 days; leave that was applied for and refused carries forward without limit. The worker can demand encashment at the end of the calendar year. On leaving, dismissal, superannuation or death, wages in lieu of leave are payable within the stated time (section 32(1)).
Section 32(1) clause by clause
| Clause | Rule |
|---|---|
| (i) | Worked 180 days or more in the calendar year |
| (ii) | 1 day for every 20 days worked; adolescent: 1 day for every 15 days; worker below ground in a mine: 1 day for every 15 days |
| (iii) | Layoff, maternity leave or annual leave availed counts towards the 180 days, but no leave is earned for the period so counted |
| (iv) | Holidays falling between leave availed (or prefixed or suffixed holidays) are excluded from the leave period |
| (v) | Service starting after 1 January: entitled at the clause (ii) rate if the worker has worked one-fourth of the total days in the remainder of the calendar year |
| (vi) | On discharge, dismissal, quitting, superannuation or death: wages in lieu of the leave earned, even if the worker has not worked the required period |
| (vii) | Unused leave is added to the next year; carry-forward capped at 30 days; refused leave carries forward without limit |
| (viii) | Worker may demand encashment at the end of the calendar year, without prejudice to (vi) |
| (ix) | Where leave exceeds 30 days under (vii)(a), the worker may encash the excess |
Payroll teams that need to rebuild leave ledgers on these rules can use our payroll compliance audit service.
Who is covered
Section 32(1) applies to every worker employed in an establishment. Under section 32(2) the appropriate Government may, by notification, extend it to any other establishment except a railway establishment. The provisions operate as in section 32(3) for a person employed in a mine, which preserves any better right under another law, award, agreement or contract of service.
Accrual worked out
The basic rate is one day of leave for every twenty days of work. Take a worker who joins on 1 January and works 240 days in the year: the leave earned is 12 days. An adolescent who works 240 days earns 16 days at the one-for-fifteen rate. The 180-day condition is the gate: a worker below 180 days does not become entitled under clause (i), subject to clauses (v) and (vi).
Part-year joiners (clause (v))
A worker who joins on a date other than 1 January gets leave at the clause (ii) rate if the worker has worked one-fourth of the total number of days in the remainder of the calendar year. The clause does not give a separate formula; apply the clause (ii) rate to the days worked.
Leave while on leave, layoff or maternity leave (clauses (iii) and (iv))
Periods of layoff, maternity leave or annual leave count towards the 180 days, but leave is not earned for that counted period. Holidays that fall within a period of leave (or are prefixed or suffixed to it) are not debited to the leave balance.
Final settlement (clause (vi))
When employment ends during the year, the worker (or heir or nominee) is entitled to wages for the leave earned up to that date, calculated under the earlier clauses, even if the worker has not completed the period needed to avail leave. The time limits are:
- Discharge, dismissal or quitting: payment before the expiry of the second working day from the date of discharge, dismissal or quitting.
- Superannuation or death in service: payment before the expiry of two months from the date of superannuation or death.
Build the leave-wage line into the full-and-final settlement checklist so the second-working-day deadline is not missed.
Carry-forward and encashment (clauses (vii) to (ix))
- Leave not taken in a calendar year is added to the next year's leave.
- The total carried forward shall not exceed thirty days (clause (vii)(a)).
- A worker who applied for leave but was not given it as required may carry forward the leave refused without any limit (clause (vii)(b)). The employer's refusal therefore does not reduce the balance.
- On demand, the worker is entitled to encashment of leave at the end of the calendar year (clause (viii)).
- Where leave exceeds thirty days under clause (vii)(a), the worker may encash the excess (clause (ix)).
The text leaves the rate at which encashed leave is paid to the wider wage provisions; the OSH Code's own definition of wages at section 2(1)(zzj) is explained in our article on the definition of wages.
Mines: better terms preserved (section 32(3))
For a person employed in a mine, sub-section (1) does not prejudice rights under any other law or under an award, agreement or contract of service. If those give longer annual leave with wages, the longer quantum applies, and sub-section (1) governs matters they do not cover. The Central Government may exempt a mine from the provisions of sub-section (1) by written order if its leave rules are not less favourable in its opinion.
What the Central Rules, 2026 add
Where the Central Government is the appropriate Government, Rule 76 requires the employer to maintain, for every employee, a record of leave with wages, electronically or otherwise, in FORM-XX, and to share the leave records of the employee once in a calendar year, on demand. The register is to be preserved for five years after the last entry and not destroyed after that unless transferred to a new register. Rule 66 deals with leave for sales promotion employees and working journalists; see our article on Rule 66 and on Rules 75 and 76. Where a State is the appropriate Government, the State's rules apply.
Practical points
- Count days worked from attendance, not from pay days.
- Keep refused leave applications on record; they carry forward without limit.
- Show carried-forward leave separately so the 30-day cap is visible.
- Prepare the leave-wage line in every exit settlement.
Example. A worker resigns in July with 10 days of leave earned but not taken. The employer must pay wages in lieu of those 10 days before the expiry of the second working day from the date the worker quits.
For the old-law comparison, see our guide on annual leave with wages in factories.
Need help with leave rules and encashment?
Leave balances, carry-forward caps and exit payments are common areas for payroll disputes. Our payroll compliance audit team can reconcile your leave policy and ledgers with section 32 and Rule 76 and flag gaps before an inspection does.
Key takeaways
- 180 days in a calendar year; one day of leave for every 20 days worked (15 for adolescents and below-ground mine workers).
- Carry-forward capped at 30 days; refused leave carries forward without limit.
- Encashment on demand at year end; excess over 30 days can be encashed.
- Wages in lieu due by the second working day (discharge, dismissal, quitting) or within two months (superannuation, death).
- Rule 76: leave register in FORM-XX, five-year preservation.
Read next
- Section 31: notice of periods of work
- Section 33: maintenance of registers, records and filing of returns
- Rules 75 and 76: register of accidents and register of leave with wages
- Annual leave with wages in factories
Disclaimer: Based on the Occupational Safety, Health and Working Conditions Code, 2020 (as enacted) and, where noted, the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 (G.S.R. 345(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.