Is every PRC employee entitled to paid statutory annual leave?

No. Only employees who have worked for a continuous period of 12 months are entitled to paid statutory annual leave. However, such continuous 12-month period of employment includes employment with any employer, and not just with the current employer.

How many days paid statutory annual leave is an eligible employee entitled to in the PRC?

An employee's entitlements to statutory paid annual leave depends on his or her cumulative service period with any employer (rather than only with the current employer) as follows.

Employee's Cumulative Service Years with Any Employer Paid Annual Leave per Calendar Year 
1 year or more but less than 10 years 5 days
10 years or more but less than 20 years 10 days
20 years or more 15 days

An employer must provide statutory annual leave for eligible employees who work part of a calendar year only (e.g., new recruits) on a pro-rata basis. An employer will not be obliged to provide any pro rata statutory annual leave of less than one day.

Can untaken statutory annual leave be forfeited if untaken by the end of the year?

No. PRC law requires the employer to arrange for its employees to take and use any accrued statutory annual leave within the calendar year in which the annual leave accrues. Where the employer cannot do so for reason of business needs, the unused annual leave can be carried over to the following year.

The only exception is when the employer has obtained the employee's written waiver which clarifies that the employee's failure to use up the annual leave is due to the employee’s own personal reasons. In these circumstances, such untaken annual leave can be forfeited and no additional compensation is required.

Can I agree with my employee to "buy out" any statutory annual leave he/she cannot take?

Where the employer cannot arrange for its employee to take his or her statutory annual leave due to business needs, the employer may agree with the employee to pay the employee compensation in lieu of the untaken annual leave. The compensation must be no less than 200 percent of the employee’s normal daily salary for each day of untaken annual leave.

When calculating the compensation for the employee's unused annual leave, the employee’s daily salary will be equal to his or her monthly salary divided by 21.75 days. The above "monthly salary" refers to the employee's average monthly salary (exclusive of any overtime pay) in the last 12 months before the above compensation is paid.

Some employers grant additional annual leave entitlements to their employees. Can this untaken contractual annual leave be forfeited by the end of the year?

Any additional annual leave entitlement offered above the statutory entitlement can be considered as contractual annual leave. The PRC law is silent on the treatment of such contractual annual leave. As such, if the employer intends to treat contractual annual leave differently from statutory annual leave, it should set out clearly in the contract of employment and/or the internal policy the terms in respect of contractual annual leave.