Shajini Surprise

Section 32 of the Occupational Safety, Health and Working Conditions Code, 2020, in force since November 2025, lets a worker carry no more than 30 days of annual leave into the next calendar year. Day 31 is not forfeited. Under the new leave encashment rules, the excess can be paid out in cash when the year closes, but the clause puts the burden on you: the money follows a request, not the calendar.

How many earned leaves can be carried forward under the new labour code?

A worker can carry forward up to 30 days of annual leave into the next calendar year, and any leave that was applied for and refused rides on top of that cap with no limit at all.

That second half is the clause worth printing. JSA Law's April 2026 analysis of section 32 reads it plainly: refused leave escapes the cap, and the balance above the cap is encashable on demand at year end. A manager who rejects your December leave has moved those days outside the ceiling. Keep that email; it proves the days were refused, not simply untaken.

The cap itself is the least interesting part of the rule. What is new for IT staff is a national floor no policy can undercut, and a payout trigger the employee controls.

It sits beside the pro-rata gratuity rule for fixed-term IT staff and the 50% wage rule that cut take-home pay, and shares their weakness: each protects only the people the Code calls workers. Four numbers decide whether you have leave to encash at all. Outlook Money (25 March 2026) and People Matters (14 April 2026) report the threshold, accrual rate and wage line; the annual floor is this article's arithmetic over a full working year.

The accrual rate is the one to check against your offer letter. Most IT policies already beat it, which is fine: the Code sets a floor, not a ceiling. It bites for the employee on a lean contract, whose policy cannot quietly drop below it.

Leave encashment rules at a glance

The rules split into two payouts: a year-end encashment of leave above the cap, paid only when a worker asks, and an exit payout of the whole balance, owed on any exit whatever the tenure.

Exit timings come from Simpliance's section 32 summary (undated, retrieved 16 October 2026, not the Gazette text); the tax line is the CBDT's 2023 change to section 10(10AA). The joiner cut-off is this article's own reasoning: at five days a week the eligibility threshold takes about 36 weeks of work, so a joiner after roughly the end of April cannot reach it by 31 December.

The exit payout protects you automatically; the year-end payout protects you only if you act. One caveat: excess days cashed in December are taxed at your slab, whereas the same days paid at exit would fall inside the exemption. Unclaimed days may lapse under company policy, so ask anyway.

Does the new labour code apply to IT employees?

It applies to IT employees who qualify as workers, which typically covers individual contributors, but managerial and administrative staff, and supervisors earning above the wage line, fall outside the leave protections in section 32.

Titles in IT are inflated, so ignore yours. A lead with no reports may still be a worker; an associate manager who signs off appraisals may not be. Check your job description for supervisory duties.

Outlook Money and People Matters both report that several states have not notified final rules; where yours has not, its Shops and Establishments Act still sets your leave terms. Whether a policy that lapses leave above the cap survives for workers is, in my view, the open question. My reading is that it should not, since a lapse clause and an encash-on-demand clause cannot both be honoured (at least not until a labour court says which wins).

On exit, the leave payout runs on the same clock as India's 48-hour full and final settlement deadline, so a month-long settlement cycle is late on this line item too. Watch for these:

• A policy line saying leave above the cap lapses on 31 December.
• A refused leave request that exists only as a verbal no.
• A settlement statement that leaves out leave wages for a short-tenure exit.

The decision is whether to ask, and for any worker heading past the cap the answer is yes. This week, check your balance against the ceiling, save every refused-leave email to a folder you control, and send HR a two-line written request to encash the excess on 31 December.

The clause usually sits a few pages into the offer letter, under a heading like Service Agreement: leave before a fixed term ends and you pay a stated sum as liquidated damages for training. Freshers at Indian IT services firms sign it on joining day. That employment bond is enforceable more often than office WhatsApp groups claim, but the printed number is where your employer's case starts, not where it ends.

Is an employment bond legal in India now?

Yes, a bond that ties you to a minimum service period is generally enforceable in India after the Supreme Court's 2025 ruling, but only for loss the employer can show and in proportion to your pay.

The case is Vijaya Bank v Prashant B. Narnaware, decided by the Supreme Court on 14 May 2025. An officer agreed to serve three years or pay ₹2 lakh, then left early. The Court held that a covenant operating during employment is not a restraint of trade under section 27 of the Contract Act. Quoting section 27 at HR no longer ends the conversation; the fight is now over amount and proof.

The win is narrower than it looks. According to Bharucha & Partners' note on where bonds stand now, the sum was held non-penal because the bank bore real recruitment cost and the officer was a senior middle manager who could pay. My reading is that the ruling quietly helps freshers, since proportionality to pay is now part of the test.

It also binds less than it seems. Vijaya Bank is a public sector bank, so for a private IT firm the judgment is persuasive, not binding, as one May 2025 post-ruling analysis notes. Tenure also moves your gratuity under the 2026 rules too. If the company is easing you out, through silent layoff signals tech workers miss, keep every email: in my view that weakens its claim to damages.

Four numbers decide what you hand over. Two come from the Code on Wages, 2019, in force since 21 November 2025. Two earlier rulings Bharucha cites, Ledalla Ravichandar v Satyam and Sicpa India v Manas Pratim Deb, cut damages for time served and pay scale. Saurabh Seth, in Bar & Bench on 24 January 2026, valued on-the-job training; that is practitioner opinion, not a ruling.

Take the deadline: under section 17(2), HR cannot park your last salary during a bond dispute. Section 18 lists every permitted deduction, from fines and advances to tax and court orders, and training recovery is not on it. The lawful route is a civil suit.

So what does a court actually allow when you leave early?

What happens if you break a training bond?

If you leave before the bond period ends, your employer can claim damages, but courts tend to cut the stated sum to proven training cost, reduce it for months served, and the claim has to go through a suit.

In the middle column, the first line is the bond and the second is what courts and the Code have allowed.

Five of eight rows favour you or turn on paperwork the employer controls. Classroom training with invoices is a real claim; shadowing mostly is not.

Can HR hold back your experience letter or final pay?

No, withholding your experience letter until you pay the bond is pressure rather than a legal remedy, and your final wages fall due on time whatever the bond dispute, so put every demand in writing.

Seth calls trading a bond payment for an experience letter illegal leverage. It still works more often than it should (a missing letter stalls the next background check). Specific performance of a service contract is barred, so the most a bond becomes is a money claim.

Notice is separate. Skip part of it and, on Seth's reading, you owe at most salary for the unserved days, never bundled into the bond figure. Check the payment date against the 48-hour full and final settlement deadline, and watch for:

• A bond letter with one lump sum and no cost breakdown.
• A training recovery line on the F&F statement, a separate issue from the wage-definition rule that reshaped take-home pay.
• Notice pay and bond damages merged into one figure you are asked to sign.

The decision is whether to pay or contest, and it turns on one document. This week, email HR for the itemised training-cost record behind your bond and state that you expect your final wages in full. If the record exists, offer your unserved share of the proven cost. If it doesn't, decline and let the company decide whether a suit is worth it.

Section 2(y) of the Code on Wages, 2019 defines wages as basic pay, dearness allowance and retaining allowance. HRA, conveyance and the rest of the payslip sit outside that definition, but only up to a point: once those exclusions pass half of total remuneration, the excess is added back and treated as wages. That add-back is the 50% wage rule. The Code commenced on 21 November 2025 and its central rules were notified on 8 May 2026, according to a 13 August 2026 analysis by law firm KS&K, so a salary restructure in this year's revision letter is compliance, not a favour.

How the 50% wage rule counts your pay

The rule adds up everything Section 2(y) excludes from wages, compares that total with half of your total remuneration, and counts any excess back as wages, the base on which gratuity and leave encashment are computed.

The exclusions are listed. KS&K's reading of the Code names HRA, conveyance, employer contributions to PF and pension, gratuity, performance incentives and overtime. Add those lines on your payslip and divide by total pay. Under half, nothing moves. Over half, the gap crosses into wages. For contract staff the same base now feeds pro-rata gratuity after one year of fixed-term service.

Employers ran this arithmetic months ago. A 21 January 2026 tally by CA Rajput of Q3 FY26 company disclosures lists one-time labour-code charges at the largest Indian IT services firms, booked because a bigger wage base means a bigger gratuity and leave-encashment liability on service already worked. I think the payslip is the wrong end of the story: the larger change sits in what you are owed when you leave, and the four figures below decide whether you should expect it.

A provision is money set aside for gratuity and leave encashment the company now accepts it owes on years you have already worked. If your employer booked one, the higher payout is sitting in its accounts. Check your exit payout for it before you sign a full and final settlement under the 48-hour deadline.

Will take-home salary reduce under the new labour codes?

Take-home falls only if your provident fund is calculated on the full wage figure; the Labour Ministry said on 10 December 2025 that PF deducted on the ₹15,000 ceiling leaves take-home unchanged.

The Ministry went further: contribution above the ceiling is voluntary. OutlookMoney's 13 December 2025 report on that clarification works one salary through, a ₹60,000 monthly CTC made up of ₹20,000 in wages and ₹40,000 in allowances. Allowances there are two-thirds of pay, so ₹10,000 of them is added back and the Code's wage figure becomes ₹30,000. That last step is my arithmetic, not the report's. The table runs both PF choices on that salary, employer share inside the CTC, as the report's own take-home figure implies.

The monthly gap does not vanish; it moves into a locked account, and half of it is your employer's share. Whether that counts as a loss depends on your rent and EMIs, not on the law. What the law settles is that you should be asked. Gratuity rises either way: it follows the Code's wage figure, not your PF election.

Is 50% basic salary mandatory under the new wage code?

No, the Code on Wages does not require basic pay to be exactly half of CTC; it requires excluded allowances above half of total remuneration to be counted as wages, whatever the payslip calls them.

KS&K makes the point directly: the rule does not oblige an employer to designate exactly half of CTC as basic. So when a revision letter says the law forced basic up, it overstates the law. That is worth raising, because a higher printed basic can drag PF up with it while the add-back alone would not.

The ceiling itself is not moving soon. People Matters reported on 3 December 2025 that the government made no commitment to raise the EPF wage ceiling to ₹30,000, saying any change needs extensive stakeholder consultation. Money pushed into PF is also harder to take out than it looks, as the EPF withdrawal rules and the 25% balance lock show. The grey area, and this is opinion, is whether firms that booked a gratuity charge quietly recover it through slimmer increments, and the place to watch is the special allowance line, year on year.

• A revision raising basic and cutting special allowance equally: CTC flat, PF on a bigger base.
• A PF deduction worked on a figure above the ceiling, with no written option offered to you.
• An exit settlement that computes gratuity on the old basic alone, ignoring the added-back slice.

The decision is narrow: PF at the ceiling or PF on full wages, and the law leaves it open. If two or more of those conditions are true, email payroll this week and ask, in writing, which wage figure your PF uses and whether contribution above the ceiling was your choice. Get the answer before the next revision letter, not after it.