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Important Issues Regarding Statutory Annual Leave in China

According to the labor law of China, the amount of the paid vacation days of an employee is generally depend on the employee’s work experience and tenure in the company. An employer can increase the number of paid annual leaves of their employee but it has to be perfectly documented in the labor contract law.

Although China is a country that is considered least generous when it comes to paid annual leave, but it is very strict about the law. In China, an employer is obliged to make his employee to take annual leave, otherwise he has to pay 200% more normal wages for each unused vacation day. The law also suggests an employer to pay the amount for every unused vacation days while they are terminating the employee.

Source: china-briefing.com

If the unused vacation days span for several years, the situation gets more complicated. For example, if an employer terminates one of his employees in 2017 and the employee has not taken any vacation days for this year than the employer doesn’t have to pay him for unused vacation day. But if the same employee has not been paid for unused vacation days since 2016, then the employer has to pay for unused vacation days. Many international companies in China provide additional annual leave to supplement the statutory annual leave. However, PRC law has no requirement on compensation for the unused additional annual leave provided by an employer and therefore any compensation may be addressed by the internal policies of the employer.

Another important thing to keep in mind that, employees who work on official holiday could have triple salary, and the employer could not replace the triple salary with complementary rests. Foreign companies need to be very cautious before asking their Chinese employee to relinquish legally entitled rights, in this case paid vacation leave. If foreign companies want to do this, they need to pursue their employees to give their consent in a written document that they are willingly not chosen their vacation time. In most cases they don’t sign this type of documents. So as an employer you can do two things:

First- Pay your Chinese employees for their vacation leave

Second- Find a way to let them take the paid time off

Foreign companies often get confused to figure out whether an employee under flexible working hour system is eligible for statutory vacation time or not, the answer YES. Similar to the employees under standard working hour system, they are also legally eligible to enjoy all the benefits of paid vacation leave in China.

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