The Regulation on Paid Annual Leave, effective from 1 Jan 2008, provides every employee in mainland China with service period over one year the right to enjoy paid annual leave. If the employer turns down the employee’s request for annual leave, the employer should pay triple wages to the employee. Enterprises with establishment in mainland China should pay attention to the regulation to avoid any unintended labour disputes.

Paid Annual Leave in Exchange for the Golden Week

Despite the fact that many companies in the Mainland offer paid annual leave to their employees, such benefit was not specified in the law until recently. In the absence of legal protection, many employees were not able to enjoy the benefit for various reasons. The Regulation on Paid Annual Leave, for the first time in law, entitles employees to have paid annual leave. It was also a move to make up for the public holiday gap left out by the cancellation of the Golden Week arrangement during 1 May holiday. As people have more freedom on the timing of their leave, the government expects the new arrangement to ease the nation-wide pressure on transportation and accommodation during the Golden Week.

Calculation of Annual Leave

Under the new regulation, any employee who has served the employer for one year or above is entitled to paid annual leave. The employee receives the same pay during the leave period. Employees with service period no less than one year and no more than 10 years are entitled to five days of annual leave. Employees with service period from 10 years to 20 years are entitled to 10 days of annual leave and those who serve over 20 years are entitled to 15 days of annual leave. Since employees may also enjoy other types of leave such as summer and winter breaks, business leave and sick leave, the regulations set out conditions under which annual leave may be offset by other leaves.

(i) The employee is entitled to summer and winter breaks and the duration of such break is longer than the duration of annual leave provided in the law；

(ii) The employee has taken over 20 days of paid business leave;

(iii) The employee has taken over two months of sick leave and has served less than 10 years;

(iv) The employee has taken over three months of sick leave and has served less than 20 years；

(v) The employee has taken over four months of sick leave and has served more than 20 years.

Triple Wages for Untaken Annual Leave

To ensure employees’ right of taking annual leave, the regulations provided that for any untaken annual leave, the employer should pay triple wages to the employee based on the number of days in the untaken leave. If the employer does not allow employee to take annual leave and refuses to pay the compensation wages, then the local labour department should issue an order for the employer to reverse the decision. Failure to reverse the decision will result in severe penalties—employer would pay double compensation to the employee, namely six times of wages based on the days in untaken leave.

Different from Family Reunion Leave

Many employers often confuse annual leave with family reunion leave, the leave that allows the employee to go back to his/her hometown to visit their families. For factories providing annual family reunion leave to the workers, can they offset the annual leave with family reunion leave? The answer is no. In fact, annual leave is a different type of leave from family reunion leave in Mainland regulations. While annual leave is set to be enjoyed by all employees, family reunion leave is only a benefit offered to employees working in state-owned enterprises or public institutions. The law does not require private enterprises to offer family reunion leave to employees. In other words, enterprises are required to provide annual leave, but not necessarily family reunion leave. These two types of leave can not off set each other. Given the above new regulation, enterprises in Mainland should adjust their human resource management system accordingly. To minimise potential labour disputes, employers should properly document employees’ leave records and institute a leave policy in compliance with the law.