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What is leave accrual?

Leave accrual is the mechanism by which an employee's leave balance grows over time. Some organisations give the full year's leave on the first day of the leave year. Others let employees earn leave gradually — a fairer approach for organisations with high early-year turnover.

Accrual methods

1. Upfront (Lump Sum) — most common in Pakistan

The full annual entitlement is credited on the first day of the leave year (1 July for most Pakistani companies, or on the employee's joining anniversary). The employee has access to all days from day one. Simple to administer; standard practice in government and many private firms.

2. Monthly Accrual

Leave is credited in equal monthly installments. For 14 days annual leave: 14 ÷ 12 = 1.167 days per month (rounded to 1 or 1.5 depending on configuration). Employees can only take leave they have already earned. Protects the company if an employee takes all their leave and then resigns.

3. Earned-Day Accrual (Statutory Method)

Under the Standing Orders Ordinance, annual leave is accrued at 1 day per 20 working days. The employee must complete 12 months before any leave can be taken. This is the statutory minimum accrual method.

4. No Accrual (Fixed Balance)

Used for leave types that don't grow over time: casual leave (10 days allocated at start of year), sick leave (allocated at start of year). Balance doesn't grow and can't be carried forward.

Law requirement on accrual

Under the Standing Orders Ordinance 1968, an employee earns annual leave at the rate of 1 day for every 20 days worked. After completing one year of service, they are entitled to 14 days' leave. The employer cannot reduce this statutory minimum, but can offer more.

Statutory accrual example:
Employee works 240 days in a year → earns 240 ÷ 20 = 12 days of annual leave
(Statutory minimum is 14 days — so if accrual yields less, the employer must credit at least 14 days)

Monthly accrual (company practice):
14 days ÷ 12 months = 1.167 days/month
By end of September (month 3 of leave year): 1.167 × 3 = 3.5 days accrued

For administrative simplicity, many organizations use the upfront method, crediting the full annual leave entitlement at the beginning of the leave year. Octal HR supports this approach while also providing flexible accrual methods to match different organizational policies and compliance requirements.

Pro-rated balance for mid-year joiners

When an employee joins mid-year, their first-year leave balance is prorated based on the remaining months in the leave year:

Example: Employee joins 1 October | Leave year: July–June | Full entitlement: 14 days
Remaining months: October to June = 9 months
Pro-rated balance: 14 × (9 ÷ 12) = 10.5 days (rounded to 10 or 11 based on rounding setting)

Octal HR calculates this automatically when an employee is added with their joining date. The initial balance is set when the leave policy is assigned to the employee.

Configure accrual for a leave type

1
Go to Leave → Settings → Leave Types → [Leave Type] → Accrual Settings.
2
Select the Accrual Method: Upfront / Monthly / Earned-Day / None.
3
For Monthly accrual, set the Accrual Day (e.g., 1st of each month) and Rounding (none / round up / round down / round half-up).
4
For Earned-Day accrual, set the Days Worked per Leave Day according to your organization's leave policy and compliance requirements.
5
Set Can use before fully accrued: Yes allows employees to use pending balance; No restricts to accrued balance only.
6
Set Proration for mid-year joiners: Enabled (recommended) or Disabled (give full balance regardless of joining date).
7
Set Minimum service before leave can be taken: e.g., 90 days for probationary employees. Applies a hold on the balance for new joiners.
8
Save. Balances are recalculated on the next nightly run.

Carry-forward and lapse

At the end of the leave year (30 June for July–June companies, or 31 December for calendar-year companies), unused leave balances are handled according to the carry-forward rule:

Leave TypeTypical carry-forward ruleNotes
Annual Leave Policy-defined limit or full balance Carry-forward, encashment, or forfeiture rules are determined by organizational policy and applicable regulations.
Sick LeaveNone — lapses at year endCannot be encashed or carried forward under most provincial laws
Casual LeaveNone — lapses at year endMost companies do not allow carry-forward for casual leave
Study LeaveAs defined by company policyOften allowed to carry forward if mid-course
Comp-OffTypically 1–3 months validityNot carried into the next leave year; must be used within the validity period

Year-end run: At the end of your leave year, Octal HR runs an automated Year-End Leave Processing job that carries forward eligible balances, lapses ineligible ones, and creates encashment payouts where configured. Review this under Leave → Year-End Processing before the new leave year starts. See Leave Year-End for full details.

Manual balance adjustments

HR can manually add or deduct days from an employee's leave balance at any time:

1
Go to Leave → Employee Leave → [Employee] → [Leave Type] → Adjust Balance.
2
Enter the adjustment amount (positive to add, negative to deduct) and the reason.
3
The adjustment is logged in the balance ledger with the HR user's name and timestamp. The employee's app shows the updated balance immediately.

Common reasons for manual adjustments include: correcting a data migration error, granting extra leave as a one-time gesture, or adjusting for a period when the employee was on an unrecorded leave before the HRMS was implemented.