Granting Annual Leave (Including Legal Revisions)
I. Introduction
The ‘annual paid leave’ in the current Labor Standards Act refers to paid vacations that employees receive in return for their work. It was originally designed to provide physical and spiritual rest to employees tired from hard work, to maintain the continuity of the labor force, and to secure a balance in people’s lives. However, Human Resources (HR) managers are often confused about how to best allow for annual leave and continually ask questions on this subject. According to the Labor Standards Act (LSA), annual leave is to be calculated and provided based on the individual employee’s start date. However, for companies with many employees, individual management of annual leave is not easy to calculate due to the different starting dates, and it is also not easy to take advantage of related laws promoting the use of annual paid leave.
Although the rules of employment and collective agreements may stipulate that annual leave will follow the LSA, many companies, for the sake of convenient labor management, provide uniformity in annual leave for employees based upon a ‘calendar year’ period, and then recalculate the annual leave based upon individual start dates at the time when employment is ended. The number of annual leave days can differ in accordance to the various annual leave-provision methods, and individual companies follow different types depending on their HR policy.
In this issue, I would like to review, in detail, the various ways in which annual leave can be calculated:
II. Legal Bases for Calculating Annual Leave
1. The Labor Standards Act – Start date
Article 60 of the LSA stipulates that annual leave shall be calculated on the basis of the start date of each individual employee.
Article 60 (Annual Paid Leave)
(1) An employer shall grant 15 days' paid leave to a worker who has registered not less than 80 percent of scheduled attendance in a one year period.
(2) An employer shall provide one day's paid leave per month to a worker whose consecutive service period is shorter than one year or whose attendance is less than 80 percent, if the worker has worked without absence for a full month.
(3) - This is valid in six months after this deletion.
(4) After the first year of service, an employer shall provide one day's paid leave for each two years of consecutive service in addition to the leave prescribed in paragraph (1) to a worker who has worked consecutively for 3 years or more. In this case, the total number of leave days including the additional leave shall not exceed 25.
2. Government Guidelines – Calendar year
Government guidelines allow for the management of annual leave based on a calendar year, with the detailed method as follows :
The period for calculation of the attendance rate in order to provide for annual paid leave under Article 60 of the Labor Standards Act shall follow the individual employee’s annual service period in principle, but for the sake of efficient labor management, the calculation period may follow a calendar year period (Jan 1 ~ Dec 31) according to the rules of employment and the collective agreement where applicable. In order not to be disadvantageous to new employees when applying a calendar year-based calculation of annual leave, it is required that in the following year the paid leave be calculated in proportion to the start date of the first year for those who have worked for less than one year, after which the company can then provide annual leave on the calendar year basis. Provided, if the total number of annual leave days calculated based upon the calendar year is less than the number of annual leave days calculated by the actual start date, the company shall provide the lesser number of additional annual leave days.
3. Rules of Employment or Collective Agreement (sample): Start Date or Calendar year
The provision of annual leave stipulated in the rules of employment is usually provided as follows:
(1) Where annual leave is calculated by the individual employee’s start date
Article 00 (Annual Paid Leave)
(1) Each employee shall be granted 15 days for a minimum of 80% attendance during the previous one (1) full year;
(2) With respect to an employee who has worked for less than one year or an employee who has an attendance rate of less than 80% in one year, the company shall allow one day of paid leave for perfect attendance for one month; and
(3) Each employee who has been employed for 3 years or longer shall be allowed one additional day for every two years exceeding the first one year of continuous employment in addition to the days of leave mentioned in Item a. above. However, the total paid leave including the additional days shall not be more than 25 days.
(2) Where annual leave is managed on a calendar year basis
Rules of Employment: Article 00 Annual Leave
Note - Subparagraphs (1), (2), and (3), have the same content as the above ROE.
(4) The calculation period for annual paid leave shall start January 1 of each year and finish on December 31 of that same year.
(5) As for an employee who started work in the middle of year, the company shall allow on January 1 of the next year, the number of annual leave days calculated in proportion to the employment period of the first year, and beginning the following year, annual leave will be adjusted and provided on a calendar year basis.
(6) At the end of employment, if the number of annual leave days calculated on the calendar year basis is less or more than the number of annual leave days calculated by the individual’s start date, the company will provide the annual paid leave allowance for the correct number of annual leave days recalculated based upon his/her joining date.
(3) Where annual leave is managed on a calendar year basis
Rules of Employment: Article XX (Annual Leave)
Note - Subparagraphs (1), (2), and (3), have the same content as the above ROE.
(4) The calculation period for annual paid leave shall start January 1st of each year and finish on December 31st of that same year.
(5) As for an employee who started work in the middle of year, the company shall provide one monthly paid leave each month until the first day of the following year in addition to monthly leave days of the above paragraph (2). On January 1st of the next year, the company provides 15 days of annual paid leave in advance.
(6) At the end of the term of employment (or when resigning), the number of annual leave days that occurs on January 1st of the year in which the employee resigns will be adjusted and settled in proportion to the date of resignation for the period from January 1 to the resigning date.
III. Methods for Calculating Annual Leave
1. Methods Available (Employees joining before June 2017)
The details of granting annual leave, as stipulated in the Labor Standards Act or the Rules of Employment, are generally similar, but the actual calculation for that leave varies greatly by company. Four types are shown: A, B, and C, and a company may use one of them.
※ Annual Leave for a Period of 5 Years and 10 Months, from May 15, 2013 to March 31, 2019
Type A: Based on Employee’s Start Date Type B: Start Date + Calendar year-based Type C: Prior Payment + Prorated
5-15-2013 started
5-15-201415 days
5-15-201515 days
5-15-201616 days
5-15-201716 days
5-15-201817 days
3-31-2019 resigned 5-15-2013 started
1-01-2009 10 days (prorated based on start date)
1-01-2014 15 days
1-01-2015 15 days
1-01-2016 16 days
1-01-2017 16 days
1-01-2018 17 days
3-31-2018 resigned (10 days deducted -adjusted according to start date) 5-15-2013 started
(7 days granted as monthly leave in advance)
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