Answer: The Regulations on Paid Annual Leave for Employees stipulates that annual leave can be arranged to be taken in the year after the year the employee become entitled to the leave, or be encashed into unused annual leave pay.1 Article 5 of the Regulations on Paid Annual Leave for Employees in 2008.This is the limitation of arbitration for paid annual leave.
You should calculate and manage employees¡¯ annual leave for individual employees with different entry times in accordance with the accounting method for annual leave days and rules for annual leave use. Let¡¯s consider a case to illustrate the accounting and processing method. It is assumed that Mr. Zhang joined the company on May 1, 2021, and he has no work experience in the past.
Before May 1, 2022, Mr. Zhang¡¯s service length is less than one year, so he was not entitled to paid annual leave. Since May 1, 2022, Mr. Zhang was entitled to five days of paid annual leave from the first year (May 2021 to May 2022). 2 Article 3 of the Regulations on Paid Annual Leave for Employees in 2008.Mr. Zhang can apply to the company for taking the leave, and as the HR manager of the company, you can also arrange Mr. Zhang to take the leave based on the recommendation from the supervisor of Mr. Zhang’s department.
On May 1, 2023, Mr. Zhang became entitled to another five days of paid annual leave from the second year (May 2022 to May 2023). Let’s assume that Mr. Zhang’s average monthly wage from the first 12 months of the first year is RMB 5,500, including the average monthly overtime wages are RMB 500.
If Mr. Zhang has not used the annual leave days from the first year (May 2021 to May 2022) before May 1, 2023, in the third year, starting from May 1 2023 up to May 1 2024, the company can either arrange Mr. Zhang to take 5 days from the first year, or pay Mr. Zhang the unused annual leave pay for the first year, and arrange for Mr. Zhang to take annual leave from the second year.
The calculation method for the first year’s unused annual leave pay is: (Mr. Zhang’s monthly wage/21.75) * 5 * 200%. In the equation, Mr. Zhang’s monthly wage is equal to the average monthly wage from Mr. Zhang¡¯s previous 12 months without overtime pay, that is, RMB 5,000 (5,500-500). In addition, the unused annual leave pay ratio, according to the Regulation, appears to be 300%; but 100% of the ordinary wage already paid should be deducted, so the ultimate ratio of the pay calculation should be 200%.3According to Article 11 of the Implementation Measures for Regulations on Paid Annual Leave for Employees in 2008, the daily wage income for calculating the unused annual leave pay shall be dividing the employee’s monthly wage by the number of days of monthly wage calculation (21.75 days). The term “monthly wage” as mentioned in the preceding paragraph refers to the average monthly wage of an employee excluding overtime wages from the 12 months before the employer should pay the unused annual leave pay. If the service for the employer is less than 12 months, the average monthly wage shall be calculated according to the actual month.At present, the judicial practices in various regions show the ratio being 200%.
Therefore, Mr. Zhang’s unused annual leave pay for the first year is: 5,000/21.75 * 5 * 200% = RMB 2,299.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
Email: wangdong@royalaw.com
- 1Article 5 of the Regulations on Paid Annual Leave for Employees in 2008.
- 2Article 3 of the Regulations on Paid Annual Leave for Employees in 2008.
- 3According to Article 11 of the Implementation Measures for Regulations on Paid Annual Leave for Employees in 2008, the daily wage income for calculating the unused annual leave pay shall be dividing the employee’s monthly wage by the number of days of monthly wage calculation (21.75 days). The term “monthly wage” as mentioned in the preceding paragraph refers to the average monthly wage of an employee excluding overtime wages from the 12 months before the employer should pay the unused annual leave pay. If the service for the employer is less than 12 months, the average monthly wage shall be calculated according to the actual month.