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PRC Labour Law - Bitesize: Is every PRC employee entitled to paid annual leave?

28 January 2010
Mayer Brown JSM Newsletter

Is every PRC employee entitled to paid annual leave?

No. Only employees who have worked for a continuous period of 12 months are entitled to paid 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 annual leave is a qualified 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 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 annual leave for employees who work part of a year only on a pro-rata basis.

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

No. PRC law requires the employer to arrange for its employees to take and use any accrued annual leave before the end of the year. Otherwise, the employer will be obliged to pay compensation (which amounts to 200 percent of the employee’s normal daily salary for each day of untaken annual leave) in lieu of the untaken annual leave to the employee.

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.

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

PRC law is silent in this aspect. It is prudent for employers to stipulate expressly in the contract that any paid annual leave in addition to the statutory entitlement can be forfeited without compensation if not taken by the end of the relevant calendar year.

Is the employer obliged to pay compensation to the employee in case the employee has any unused statutory annual leave on termination date of employment?

Yes. While the law is not entirely clear, such compensation is generally considered to be 200 percent of the employee’s normal daily salary for each day of untaken statutory annual leave. Such compensation can be avoided if the employer can arrange for its employees to use up their untaken leave before the termination date.

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