Under Chinese labor laws, employees who have worked continuously for one year are entitled to paid annual leave (年休假). The statutory vacation period, based on years of service, is as follows:
- More than 1 and less than 10 years service: 5 days vacation
- More than 10 and less than 20 years service: 10 days vacation
- More than 20 years service: 15 days vacation
“Years of service” is the employee’s total years of employment with anyone. This means your new employees may be entitled to paid annual leave during their first year of employment with you as well. The number of paid vacation days your new employee is entitled to is calculated using the following formula: (the remaining calendar days during the calendar year the employee started his/her employment ÷365) × the number of statutory vacation days the employee is entitled to under the law (as stated above, this depends on the total number of years the employee has worked).
If you offer more vacation time that the statutory minimum — usually by specifying the more generous vacation time in your rules and regulations — you are legally mandated to provide the extra vacation time you offered.
However, under the following circumstances, the employee is not entitled to his or her annual vacation time in the current year:
- The employee has taken summer and winter breaks longer than the statutory annual leave
- The employee has taken personal leave in excess of 20 days
- An employee with more than 1 and less than 10 years service has taken more than 2 months of sick leave
- An employee with more than 10 and less than 20 years service has taken more than 3 months of sick leave
- An employee with more than 20 years service has taken more than 4 months of sick leave.
Employers are required to make arrangements for employees to take vacation time each year. Unused vacation time in one year may be carried over to the next year, but not beyond that one year. An employer who fails to allow an employee to take annual leave must pay that employee 300% of the employee’s daily wages for each unused vacation day. This 300% payment is not required if the employee voluntarily chooses not to take his or her vacation days. However, employers should proceed with caution regarding employees who “volunteer” not to take vacation time because if an employee claims compensation for unused vacation time and the employer cannot produce evidence that the employee voluntarily gave up the unused vacation days, the employer must pay the 300%.
We are aware of many instances where foreign companies were not aware of this rule and ended up having to pay a lot of money to Chinese employees who were. We advise our clients to make sure that all of their employees take ALL of their vacation days or (if this simply is not possible) have employees who are not going to use all of their vacation time sign a writing in Chinese making very clear it was the employee’s own decision to forsake vacation time.
Bottom line: Chinese labor laws mandate employers arrange for their employees to take paid annual leave and you should think long and hard before you take any of this vacation time away, either by unilateral action or even by agreement.