There are no thumb rules to it. You can design the leave policy according to your business needs. Following are some of the market practices.
You can have leaves either as per the calendar year (Jan - Dec) or the financial year (Apr - Mar). For example, if your organization has 21 earned leaves, around 12-15 can be carried forward to the next year. The carried forward leaves can lapse at the end of the second quarter of the year. At the time of separation from services, the earned leave balance will be adjusted against the full and final settlement.
In the second scenario, you can simply pay them the balanced earned leaves; however, you have to set a cap on it. For example, you can pay them up to 10 leaves. If the leaves exceed 10, the balanced leaves will lapse.
In the third scenario, which I follow and has eased my life, give them the total leaves in a year. For example, 21 leaves, which is 1.75 per month. They cannot carry forward the leave; simply encash it at the end of the year.
Hope this helps!