A small company's leave policy is usually one of three things: missing, copied from a friend's company, or a 14-page document nobody reads. None of these work. A good leave policy is one page, clearly written, enforceable, and matches how your company actually wants to run. Here is how to set one up.

The 8-step framework

1. Start with the statutory minimums

Your leave policy must, at minimum, comply with provincial labour law. See Pakistan labour law 2026. Typical minimums:

Casual leave: 10 days/year
Sick leave: 8-16 days/year (province-dependent)
Annual/earned leave: 14 days/year (accruable)
Maternity: 180/120/90 days (per Maternity & Paternity Leave Act)
Paternity: typically 30 days
Public holidays: as gazetted

You cannot go below these. You can go above (and many companies do for retention).

2. Define leave types your company will offer

Start with the statutory types above. Then decide on optional types:

Marriage leave (5-7 days), common in Pakistan
Bereavement leave (3-5 days), also common
Hajj leave (one-time, up to 30 days unpaid or paid)
Study leave (case-by-case)
Unpaid leave (flexible duration)

3. Set the accrual model per type

Two options: upfront (entire year's leave available January 1) or accrual (1.17 days per month for 14 days/year). Annual leave is usually accrual; casual leave can be either.

4. Define eligibility

Probationers usually get no annual leave during probation, but do get casual and sick leave. Permanent staff get full eligibility. Contractors typically get no leave, since they work on project-based arrangements.

5. Define carry-forward and encashment rules

Annual leave can usually be carried forward up to a cap (often 30 days). Casual and sick leave usually lapse at year end. Annual leave is normally encashable on exit, and sometimes every year once it hits the cap. Write the rule down clearly.

6. Define approval workflow

Single-day leave needs manager approval. Multi-day or sandwich leave needs the manager and HR. Long leave (>10 days) or unpaid leave needs the manager, HR and senior management. Maternity and paternity leave is usually arranged with HR in advance.

7. Define notification rules

Casual leave needs at least 24 hours' notice (same-day is sometimes allowed for emergencies). Annual leave needs 7 days' notice for a short break and more for a longer one. Sick leave needs same-day notification, with a medical certificate for more than 2 days. Some companies require 30 days' notice for vacations exceeding 7 days.

8. Document the sandwich-leave and holiday-bridge rules

This is where companies get into disputes. Decide explicitly:

Friday and Monday leave with a Saturday public holiday: does Saturday count as leave?
Eid plus adjacent leave: how does it affect the leave balance?
Working on a public holiday: does it earn comp-off or premium?

The one-page leave policy template

Your final policy should fit on one page or one screen. Cover: types, quotas, accrual, eligibility, carry-forward, encashment, approval chain, notification rules, sandwich-leave rules. Anything more is usually not read.

The one-page policy in software

Once written, configure it in your HR software. Every rule should be enforced automatically by the system:

Leave types match policy
Quotas applied automatically
Eligibility checks built in
Approval chains routed per type
Encashment calculated correctly
Sandwich-leave handling configured

A policy that lives only on paper gets forgotten whenever it is inconvenient. A policy the software enforces stays consistent.

Common leave-policy mistakes

Copying from another company without adapting
Going below statutory minimums (illegal)
Not defining sandwich-leave rules, so every Eid becomes a dispute
No clear encashment policy, which leads to year-end arguments
Policy on paper only, not enforced in system
Different rules for "favourites", which sets a precedent that destroys trust

The Zaffre HRM fit

Zaffre HRM comes with Pakistani statutory leave types already set up, rules you can configure, sandwich-leave handling, and automatic balance, carry-forward and encashment calculation. Book a demo to see your leave policy applied in the system.

How to Set Up a Leave Policy for a Small Company in Pakistan