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What happens at year-end?

The leave year-end process handles four things for every employee:

  1. Close old balances — Freeze all leave balances as of 30 June
  2. Handle unused days — Each leave type's unused balance is either encashed, carried forward, or lapsed
  3. Generate encashment payouts — Push encashment amounts to July payroll
  4. Initialise new-year balances — Credit fresh entitlements for the new leave year (1 July)

For Pakistan's July–June fiscal year, the standard year-end date is 30 June. If your company uses a January–December calendar year, configure the leave year end as 31 December under Leave → Settings → Leave Year.

Year-end timeline

2 weeks before year-end (approx 15 June)
Octal HR sends HR reminder — "Leave year closes in 14 days. Please resolve pending leave requests and review balances." Run the Year-End Preview report to see projected carry-forwards and encashments.
1 week before (23 June)
Deadline for pending leave approvals — Any leave request that spans the year-end (e.g., 28 June – 5 July) must be approved so it is correctly split between the old and new year balances.
30 June
HR runs Year-End Processing — Review and confirm in Octal HR. All old balances are frozen. Carry-forwards and encashments are calculated. Lapsed days are zeroed.
1 July
New-year balances initialised — Fresh entitlements credited. Carry-forward balance added. Employees see their new balance in the app on 1 July morning.
July payroll run
Encashment payouts processed — Annual leave encashment amounts included as "Annual Leave Encashment" addition in July payroll. WHT applied to taxable encashment amounts.

Three outcomes per leave type

Leave typeOutcome for unused balanceCarry-forward limit
Annual LeaveUp to N days carried forward; excess encashed or lapsed per policyCommonly: same as annual entitlement (e.g., max 14 days)
Casual LeaveLapse (no carry-forward, no encashment)0
Sick LeaveLapse (Pakistan law: sick leave does not carry forward)0
Study LeaveCarry forward up to N days (if mid-course)Company policy — commonly remaining course days
Comp-OffExpired comps already lapsed during year. Remaining valid comp-offs from Dec–June may carry into July if within validity period.Per validity period of each credit
Maternity / PaternityDoes not carry forward — non-recurring leave type0

Configure each leave type's year-end handling under Leave → Settings → Leave Types → [Type] → Year-End Action: Lapse / Carry Forward (all) / Carry Forward (max N days) / Encash / Encash excess, carry rest.

Running year-end processing

1
Go to Leave → Year-End Processing. Select the Leave Year to close (e.g., 2024–25: July 2024 – June 2025).
2
Click Generate Preview. Octal HR calculates, for every employee and every leave type: closing balance, carry-forward amount, encashment amount, lapse amount.
3
Review the preview table. You can search by employee name or department. Override individual rows if needed (e.g., grant an exception to carry forward more than the standard limit for a specific employee).
4
Verify the Total Encashment Payout figure at the bottom. This is the total that will flow into July payroll — ensure you have the budget approved before proceeding.
5
Click Run Year-End Processing. Confirm the dialog: "This action cannot be undone after the new year balances are initialised. Proceed?" Click Confirm.
6
Octal HR closes the old year balances, calculates new year entitlements, and queues encashment payouts for July payroll. A summary email is sent to all HR Admins.

Irreversible action: Year-end processing cannot be fully undone. If you discover an error after running it (e.g., wrong carry-forward limit applied), you must use Leave → Employee Leave → [Employee] → Manual Balance Adjustment to correct individual employee balances. Always review the preview thoroughly before confirming.

Pre-processing checklist

All pending leave requests resolved — No requests in "Pending Approval" status. Run Leave → Reports → Pending Requests and resolve each one.
Cross-year leaves handled — Any approved leave spanning 30 June and 1 July (e.g., 28 June – 3 July) is counted correctly: days up to 30 June from old year, days from 1 July from new year. Verify by checking the affected employees' leave details.
Year-end encashment limits confirmed — Confirm with finance/management: carry-forward limit (e.g., max 14 days) and what happens to excess (encash vs forfeit). Update leave type settings before running processing.
New year leave year dates set — Confirm the new leave year start date is 1 July 2025. Check under Leave → Settings → Leave Year.
New-year holiday calendar loaded — Add all FY2025-26 gazetted holidays to the holiday calendar. Go to Leave → Settings → Holiday Calendar → FY 2025-26.
Budget approved for encashment payouts — Confirm with Finance that the July payroll can absorb the encashment total shown in the preview.

New year balance initialisation

After year-end processing, on 1 July each employee receives their new-year opening balance:

  • Annual leave: Full entitlement (e.g., 14 days) + any carried-forward days from last year
  • Casual leave: Full entitlement (e.g., 10 days) — fresh start, no carry-forward
  • Sick leave: Full entitlement (e.g., 10 days) — fresh start
  • Mid-year joiners: Prorated balance based on months remaining until next year-end

Employees can see their new-year balances in the app from 1 July morning (after the nightly balance initialisation run completes around 02:00 PKT).

Year-end reports

ReportPathUse
Year-End Preview ReportLeave → Year-End Processing → Generate PreviewReview before running; shows all carry-forwards and encashments
Annual Leave Encashment SummaryLeave → Reports → Leave EncashmentList of employees receiving encashment with amounts; used by payroll and finance
Carry-Forward SummaryLeave → Reports → Year-End SummaryShows old-year closing balance, carry-forward amount, and new-year opening balance per employee
Lapsed Leave SummaryLeave → Reports → Year-End Summary → LapsedAll leave days that lapsed (forfeited); useful for employee communication and dispute prevention

Employee communication: After year-end processing, send each employee their new-year opening balance via email using Leave → Reports → Balance Summary → Send to Employees. This prevents balance disputes during the year and is considered good HR practice. The email shows: opening balance, carried forward days, and new entitlement for each leave type.