Actually there are laws on leave encashments, see in every shops and establishment act there are decided leaves and there is a provision for carry forward along with cash payments for them. Like for eg in Punjab and Haryana Shops and Establishment ActLeave- See Indian Labour Laws & Shram Suvidha Simplified " Every employee who has been in employment for not less than twenty days in a year shall be entitled to one days earned leave for every such twenty days:If an employee is discharged or dismissed from or leaves service during the course of the year he shall be entitled to leave with wages or wage in lieu of un-availed leave.If an employee does not in any one year take the whole of the leave allowed to him under clause (a), any leave not taken by him shall be added to the leave to be allowed to him in the succeeding year: Provided thatSubject to any specific agreement between the employer and the employee, the total number of days of leave that may be carried forward to a succeeding year shall not exceed forty in the case of a young person or thirty in any other case;The provisions of this section shall not operate to the prejudice of any rights to which an employee may be entitled under any other law or under the terms of any award, agreement or contract of service;Where such award, agreement or contract of service provides for a longer leave with wages or weekly holidays than those provided under this section the employee shall be entitled to only such longer leave or weekly holidays as the case may be.Leave period in clause (a) shall, when applied for be granted except for a valid reason to be communicated in writing by the employer to the employee within fifteen days of the application: Provided that the leave so refused shall, if applied for again, be allowed during the year.Notwithstanding anything contained in the above clauses every employee in an establishment shall be allowed with wages seven days casual leave and seven days sick leave in a year."Now those covered under this act can follow the same parallel while allotting encashment facility