Court: Number of Days Exceeding Statutory Days Should Be Deemed as Additional Benefits to Employee

Annual leave with pay (hereinafter referred to as "annual leave") is a legitimate right and interest enjoyed by employees according to law. Then, can employees ask the company to pay for untaken annual leave if the days of annual leave are stipulated in the labor contract and exceed that provided by statutory standard? And if the labor contract is terminated, how to calculate the days of annual leave in current year?

[Case Review] 

In February 2016, Mr. Zhao joined a computer company as a senior recruitment consultant with a monthly salary of 12,000 yuan. It's stipulated in the labor contract that the employee can enjoy 12 days of annual leave each year after he/she has been on the job for one year. After working at the company for three years, Mr. Zhao submitted the resignation in September 2019, which was approved by the company. When handling resignation procedures, Zhao suggested that he had two days' annual leave untaken in 2018 and all annual leave days untaken in 2019, totaling 10 days, and therefore asked the company to pay converted salary of more than 11,000 yuan. Failing to reach an agreement, Mr. Zhao sued to the Jing'an District People's Court of Shanghai (hereinafter referred to as the "Shanghai Jing'an Court"). After investigation, it's found that Zhao has worked for more than 10 years but less than 20 years accumulatively, in which case he can enjoy 10 days of paid annual leave according to law.     

Mr. Zhao held that the number of days of annual leave was clearly stipulated in the labor contract. Although the contract is terminated now, there's annual leave untaken. The company shall pay 300% of his daily wage income for each day of the annual leave untaken.

The computer company, on the other hand, held that Zhao should enjoy 10 days' statutory annual leave, and the days of annual leave higher than that prescribed by law are benefits granted to the employee and such annual leave is not paid if untaken.

[Case Study]

The Shanghai Jing'an Court held that, it's expressly agreed in the labor contract that employee can enjoy 12 days of annual leave after one year's work, which is higher than statutory days but is reasonable. Days of annual leave exceeding statutory days should be recognized as additional rest days the employer provides for the employee. As two sides didn't have an agreement on converting untaken annual leave of such nature into salary according to the statutory standard, the plaintiff's claim for payment for such untaken annual leave wasn't supported.          

In view of Zhao's cumulative length of service, he should enjoy 10 days' statutory annual leave in 2018, which has been taken in that year. Therefore, the defendant doesn't need to pay for statutory annual leave that is untaken in 2018. 

Days of statutory annual leave to which Mr. Zhao is entitled shall be calculated as per the days he has worked for the company in the current year. The court decided that the company should pay for 7 days' annual leave which is due but untaken in 2019, in other words, pay Mr. Zhao the salary worth of such leave of more than 7,700 yuan. 

The court reminds that when the employer rescinds or terminates the labor contract with an employee, the number of statutory annual leave days shall be calculated as per the formula: the number of calendar days the employee has worked for the employer in the current year /365 days * the days of annual leave he is entitled in the current year - the days of taken annual leave in the current year. Days of annual leave exceeding those prescribed by law shall be recognized as the welfare provided by the employer for the employee, and whether the employer shall pay for such annual leave due but untaken depends on whether both sides have a clear agreement on the payment and payment criteria. It should be noted that although the employer has to pay 300% of employee's daily wage income for each day of the annual leave due but untaken according to relevant provisions, the actual payment criteria shall be 200% of employee's daily wage income if the employer has paid the salary for normal working hours.

[Relevant Laws]

I. Labor Law of the People's Republic of China

Article 45 The State shall practice a system of annual vacation with pay.

Laborers who have worked continuously for one year or more shall be entitled to annual vacation with pay. Concrete measures shall be formulated by the State Council.

II. Regulation on Paid Annual Leave for Employees

Article 3 The annual leave shall be five days for employees who have accumulatively worked for 1-10 year(s); 10 days for employees who have accumulatively worked 10-20 years; and 15 days for employees who have accumulatively worked for 20 years or more.

III. Implementation Measures for Paid Annual Leave for Employees of Enterprises

Article 3 Employees who have worked continuously for one year or more are entitled to paid annual leave.

Article 4 The days of annual leave which may be taken by an employee shall be determined according to the employee's accumulative working time which shall cover the employee's working time in the same or different employers and the hours deemed as working time by any law, administrative regulation or State Council provisions.

Article 10 Where an employer does not give annual leave to an employee or gives him days of annual leave less than the days of annual leave due upon the consent of the employee, it shall pay the employee 300% of his daily wage income for each day of the annual leave due and not taken in the year, which includes the wage income to be paid by the employer to the employee per day in normal working days. ¡¡

An employer shall give annual leave to its employees, but if any employee gives a writing notice of not taking annual leave on his own will, the employer is allowed to only pay for the employee's normal working days.

Article 12 If, when an employer and its employees relieve or terminate the labor contract, the employer has not granted the employee the due annual leave, the employer shall calculate the daily wage of the annual leave due and pay for the untaken annual leave in accordance with the past working days the employee has worked for the employer in the current year. The part of the untaken annual leave due which is less than 1 day shall not be paid.

The calculation formula in previous provision is as follows: (the number of calendar days the employee has worked for the employer in the current year /365 days) * the days of annual leave he is entitled in the current year - the days of taken annual leave in the current year.

(Authors: Zhang Jingshu and Liu Xiaoli, Shanghai Jing'an Court)