Annual leave is one of the questions employees ask HR most often, and it is one where many companies' internal regulations do not match the law — particularly on accumulation and payment when an employee leaves.
Labour protection law calls annual leave annual holiday, which is a holiday the employer must pay wages for — it is not leave the employer may choose to approve or not.
Minimum Entitlements
- An employee who has worked continuously for a full year is entitled to annual vacation leave of not less than six working days per year.
- The company may grant more than this, for example increasing it according to length of service.
- For an employee who has not yet completed one year of work, the employer may grant leave on a pro-rata basis.
- During annual vacation leave, the employee receives normal wages.
Who Determines the Holidays
The law provides that the employer is the one who sets the annual leave in advance, or sets it as agreed with the employee. In practice, most companies have the employee submit a request and the supervisor approve it, which is acceptable if it is written into the work rules.
The point to watch out for is that if in that year the employer does not arrange for the employee to be able to take the leave, for example by rejecting every request because work is busy, and the employee then works on the day they should have had off, the employer may have to pay wages as if the employee had worked on a holiday.
Carrying Leave Over Between Years
The law does not require vacation days to be accumulated. However, it does allow the employer and employee to agree in advance to accumulate them or carry them forward to be combined with the following year. Good regulations should answer clearly:
- Whether accumulation is permitted
- The maximum number of days that may be accumulated
- The deadline by which accumulated days must be used
- What happens if they are not used within that deadline
A regulation stating that "unused days are deemed waived" must be read together with the points above. If the employee did not use the days because the employer did not arrange for time off, this wording may not help the employer.
When an Employee Leaves: How Much Must Be Paid in Money?
The right to receive payment in lieu of unused annual leave depends on the reason the employee left.
| Situation | Must be paid |
|---|---|
| Employer terminates employment, and the employee did not commit serious misconduct | Accumulated annual leave + annual leave for the year of termination, on a pro-rata basis |
| Employee resigns voluntarily | Accumulated, unused annual leave from previous years |
| Termination for serious misconduct as prescribed by law | Accumulated, unused annual leave from previous years |
This payment is calculated from the daily wage, which must also include any additional payments that count as wages. See Which payments count as wages
Employer side: Write the regulations in a single paragraph
- Specify the number of days based on length of service and the pro-rata calculation method for the first year.
- Specify the request submission and approval process, along with the principle of how the company will arrange leave if a request is denied.
- Specify carry-over, caps, and deadlines for use.
- Specify payment in lieu of leave upon employee departure, in accordance with the law.
- Ensure the payroll system can calculate each person's remaining days at any time.
Read more
- Unpaid wages and overtime that was not paid
- Work rules: which company size is required to have them
- How many employees require what
📌 See more: Employment contracts, salary structures and employee handbooks · Labor cases
If your company's annual leave rules were written a long time ago, or a dispute has arisen with an employee who has left, consult our team of lawyers. We review the rules and calculate the entitlements for you.
This article is general information, not legal advice for a specific case.
