What is a Leave Management System?

A leave management system is a tool or software that helps businesses track and manage employee leave requests. It gives employees a self-serve portal where they can request for days off, allows managers to approve or reject the leave, and also allows the HR and finance teams access to this data.

Leave management systems allow businesses to define leave policies, mandatory holidays, optional holidays and more.

A good leave management system should also be highly customizable and should be able to integrate with various other HRMS and payroll software. For example, with RazorpayX Payroll, businesses can synchronize employee leaves, shift timings, and holidays with payroll for automated payroll processing.

What is Leave Management?

Leave management refers to the policies and processes defining how employees can take time off work. It should cover mandatory holidays like Independence Day, state-defined holidays like Karnataka Rajyotsava and optional holidays like Holi. It should also cover policies for how many paid days off each employee gets, and leave encashment policies.

Importance of Leave Management

As per a survey conducted across 19 countries by Expedia, 75% of Indians feel vacation deprived which is the highest in the world. This is why leave management is so important – employees who are able to take time off come back feeling refreshed and rejuvenated, with new motivation to work. 

HR teams should implement policies that allow employees to take time off without feeling stressed about finishing work or confused about how to apply and track their leaves. A good leave management system makes this process much easier for everyone: HR departments, employees and managers.

Automated Leave Management

Types of Leaves

There are various types of leaves that are either instructed by the government or willingly provided by the company.

1. Earned Leave (EL) or Privileged Leave (PL)

The employees earn these leaves when they work for a particular period in an organisation. For instance, some organizations provide 1 EL for 23 working days. The employees can avail these leaves without any salary deductions, provided the employees have prior approval from the management (except during emergencies). This leave can be encashed as well.

2. Casual Leave (CL)

These leaves are for short durations and require prior approval from the management. At a stretch, an employee can avail of 3 to 7 days of casual leaves, a number that usually varies across companies and industries.

3. Sick Leave (SL)

The employees can request these leaves if they fall sick and can’t work. The employees may be required to provide a medical certificate if the number of sick leaves, at a stretch, extends beyond a specific period.

Some companies like Razorpay are renaming sick leaves to ‘wellness leaves’ to encourage employees to take leaves for mental health, given the work from home situation. 

leave management system4. Leave without pay (LWP)

When the employees exhaust all their leaves and still need more leaves, the additional leaves result in loss of pay and hence the name. However, the employees can also adjust these leaves against their future leaves if the leave policy allows.

5. Compensatory off or Comp off

When the employees work during holidays, they are compensated with additional leaves that are less than equal to the number of holidays worked. Every company has a different policy for compensatory off.

6. Maternity Leave (ML)

In India, women employees are eligible for 26 weeks of paid leave for their pregnancy, provided they worked for at least 80 days during the 12-month period preceding the delivery date. However, after the birth of the first two children, the eligibility reduces to 12 weeks only.

7. Marriage Leave

It isn’t a legal entitlement in India. Employees may be granted anywhere between 1 to 15 days, while most companies offer three days of marriage leave. Also, this leave can be availed only (first marriage in most companies) once during an employee’s entire employment period.

8. Paternity Leave

It is a leave type offered to the father of a newborn baby so that he can take care of the infant and the mother. The leave entitlement may vary between 2 days to 4 weeks based on company policies.

9. Bereavement Leave

It is a leave granted to an employee when there is a death in their family so that the employee can participate in the last rites, take care of personal matters, and grieve. The leave entitlement may vary between 2 to 20 days based on company policies.

Why is a leave management system required?

Leave management is an integral part of any organisation for various reasons, such as:

1. Statutory compliances

You must maintain a record of the paid leaves that your employees have taken during a particular period. This information is needed to comply with the statutory requirements of the states.

2. Record keeping

To create & maintain a leave policy, it’s essential to record the leaves taken and outstanding balance. Besides, this record also helps the employees to keep track of their leave balance and entitlements.

3. Business operations & planning

You must ensure that the business operations don’t suffer due to the absence of some employees. The leave tracker helps admins decide whether to approve or reject leaves based on the availability of resources.

4. Reporting & analytics

It provides a holistic view of the trend in leaves and how it affects the overall operations. You can draw meaningful insights based on the reports and take corrective measures if required.

What Leave Management Related Challenges Do HR Teams Face?

Some of the most significant difficulties companies face in the absence of a modern leave management solution are:

1. Tracking leaves

Leave tracking is the fundamental requirement of a leave management system, but it can be pretty challenging. It is difficult for the management to keep track of employee leaves and attendance with papers and sheets while carrying out important business operations. 

Inability to track leaves properly can result in staffing shortages, workload build-ups, and business losses.

2. Payroll processing error

It’s impossible to think of accurate payroll processing without proper leave management. If there is an error in leave tracking, it will subsequently lead to errors in payroll processing. Hence, it is essential to maintain the type of leaves granted to the employees to compute the compensation accurately. 

RazorpayX Payroll’s online leave management system is integrated with payroll and ensures error-free employee salary payments.

3. Communication 

Many organisations fail to communicate the leave policies and the entitlements to the employees appropriately. It results in confusion, frustration, and discontent among the workforce. It is an employee’s right to know about the organisation’s leave policies and the related benefits.

Routine admin activities in leave management

Let us now look at the routine activities of an admin engaged in leave management.

  1. Decide on a comprehensive holiday list based on office location.
  2. Create leave types to ensure employee wellbeing.
  3. Layout pro-rated leave policies based on days, months, and other round offs. 
  4. Decide whether or not to club the weekends or holidays with the leaves.
  5. Configure frequency of leave accretion – weekly, monthly, or yearly.
  6. Set the number of compensatory leaves (if applicable) credited for work done during weekends or holidays.
  7. Create an approval mechanism that clearly shows who approves which type of leave requests.
  8. Create customisation for approvals based on multiple criteria.
  9. Generate comprehensive leave and employee attendance reports.

Why Should You Choose Leave Management System by RazorpayX Payroll?

RazorpayX Payroll is a cloud-based leave management solution that helps automate and integrate the leave management process with payroll so that a single platform caters to all employee administration needs.

leave management systemBenefits of using RazorpayX Payroll are:

1. Track leaves from a single dashboard

Your employees can view leave balance from a single dashboard before applying for leaves. An administrator can choose even to allow a negative leave balance in RazorpayX Payroll. RazorpayX Payroll provides a list of holidays in the software; all you have to do is select the checkbox of the leaves you want to incorporate in your organisation.

2. Make a unique holiday list

We understand that ‘one size doesn’t fit all.’ That’s why RazorpayX Payroll provides easily configurable fields such as leave types, holiday list. You can add custom holidays that fit your business-specific needs. You can set custom shift timings and track them in the software with just the click of a button.

3. Access it from anywhere

Since RazorpayX Payroll is a cloud payroll software, it ensures hassle-free access to the leave management system online – from any device, at any time. You also get rid of software update hassles and server infrastructure costs. All the responsibilities of managing and maintaining it lie with us.

4. Do it all from Slack

We didn’t just stop at cloud. RazorpayX Payroll is integrated with Slack, a business communication platform. With this, employees can apply for leaves and admins can view all leave requests and take action without leaving Slack. Employees can even view the complete list of holidays from the Slack app itself.

5. API ready system

You can even synchronise an existing leave and attendance management system with RazorpayX Payroll through API. It will automatically fetch the data and include it while making month-end payroll calculations.

So, what are you waiting for? Sign up for RazorpayX Payroll today and experience the combined power of automated leave management and payroll system.


What are the features of a good leave management system?

A good leave management system offers an easy way for employees to request and track leave, with features like self-service portals and automatic leave balance updates. It also allows for flexible policy configuration and approval workflows to suit your organization's needs. Additionally, integration with existing HR and payroll systems streamlines data flow and reduces errors.

What are the benefits of leave management system?

Leave management systems offer a win-win for both employers and employees. They streamline leave requests and approvals, saving time and reducing paperwork. Automated features ensure accuracy and real-time data, while clear visibility into leave balances empowers employees. Overall, these systems improve efficiency, boost compliance, and foster a more transparent work environment.

What are the best leave management systems in India?

Choosing the best leave management system depends on your company size, needs, and budget. Here are some popular options in India. RazorpayX Payroll: RazorpayX offers a comprehensive HR suite that includes leave management, attendance tracking, payroll processing, and more. It integrates with Slack for easy leave requests and approvals, and automates tasks to save HR time. Zoho People: A comprehensive HRIS platform with leave management features, Zoho People offers scalability for growing businesses. LeaveManager: This cloud-based system caters to businesses of all sizes and offers features like leave tracking, reports, and analytics. PocketHCM: A user-friendly option with mobile apps for employee self-service, PocketHCM provides leave management, attendance tracking, and payroll. HRMS Lenny: This feature-rich platform includes leave management, attendance, performance management, and recruitment tools.


Alish is a writer at RazorpayX. Zoophilist. Coffee Addict. And now a FinTech enthusiast. When not writing you'll find her learning French, taking a long walk (or run) with her dog, or Netflixing.

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