Useful Info

According to court precedents and administrative interpretations, if an employee provides work without using annual paid leave, the employer must pay annual paid leave work allowance for the unused leave days. Additionally, even if annual paid leave has accrued but the employee retires without using it, the employer must pay the work allowance for the unused annual paid leave days. The annual paid leave work allowance can be claimed at the point when the right to claim annual paid leave expires. In other words, Article 59, Paragraph 7 of the Labor Standards Act stipulates that 'annual paid leave expires if not exercised within one year,' so after one year from the date the annual paid leave could be used, it can no longer be claimed as leave, and the leave claim right converts to a work allowance claim right. However, if the employee was unable to use the annual paid leave due to the employer's instructions, or if the employer failed to grant the leave despite the employee's request, and so on due to the employer's fault, the annual paid leave from the previous year can still be claimed even after one year (proviso to Article 59, Paragraph 7 of the Labor Standards Act). Since the annual paid leave work allowance corresponds to wages for the work provided, its statute of limitations is the same as that for wage claims, which is 3 years. Therefore, the annual paid leave work allowance can be claimed within 3 years from the day after the leave claim right expires due to not using the annual paid leave for one year.
According to the administrative interpretation of the Ministry of Employment and Labor, if annual paid leave is calculated uniformly for all employees based on the fiscal year for the convenience of personnel management through collective bargaining agreements or employment rules, the right to claim annual paid leave work allowance is deemed to arise on the first day of the year following the year in which the annual paid leave could be used. On the other hand, regarding the annual paid leave work allowance that arises when an employee retires without using annual paid leave, the administrative interpretation of the Ministry of Employment and Labor states that if the employee works and retires for a period exceeding the unused annual paid leave days of that year, the full annual paid leave work allowance corresponding to the unused leave days must be paid; however, if the employee works and retires for a period less than the unused annual paid leave days of the retirement year, the annual paid leave work allowance corresponding to the number of workdays when leave use was possible must be paid. In other words, if an employee who joined on January 1 retires on January 10 of the year when they could use 20 days of annual paid leave due to perfect attendance in the previous year before retirement, the annual paid leave work allowance must be paid only for the actual days when leave use was possible, excluding paid holidays or agreed paid holidays from the 10 possible leave use days in the retirement year. However, Supreme Court precedents differ from the Ministry of Employment and Labor's interpretation, holding that the annual paid leave work allowance must be paid for the entire unused annual paid leave days that could not be used due to retirement, regardless of the possible annual leave use days. Additionally, the administrative interpretation of the Ministry of Employment and Labor states that the allowance arising from working without using the annual paid leave accrued in the year before retirement is included in the base wage for calculating average wages for severance pay at 3/12 of its amount, but the annual paid leave work allowance that arises due to retirement (the annual leave work allowance arising from not using annual paid leave accrued in the retirement year) is not included in the base wage for calculating average wages for severance pay.