An amendment to the Labor Standards Act (the “LSA”) (the “Amendment”), which limits the exercise period of annual paid leave granted to employees whose employment period is less than one year while simultaneously encouraging such employees’ use of annual paid leave days, became effective as of March 31, 2020.

Prior to the Amendment, under the November 28, 2017 amendment to the LSA (which was enforced on May 29, 2018), (i) an employee who has worked for one year accrued one day of paid leave per month within the first year of continuous employment and accordingly received up to 11 days of annual paid leave; and (ii) an employee who has recorded 80% or better attendance in the year following the first year of employment received up to 15 days of annual paid leave in the second year of employment.  As a result, an employee was able to receive a total of up to 26 days of annual paid leave during the first two years of employment.  If an employee did not use any of these days, he/she was entitled to compensation from employers for the unused leave.  Further, as the previous LSA provided that the 11 days of annual paid leave accrued during the employee’s first year of employment was excluded from the employer’s encouragement to use such days of annual paid leave, the employer’s financial burden unavoidably increased whenever an employee preferred monetary compensation over the use of annual paid leave.

To address such issues, the Amendment (which became effective as of March 31, 2020) provides that the 11 days of annual paid leave, which are accrued on a monthly basis during the first year, will be forfeited if not used by the employee by the end of the first year (Article 60 (7) of the LSA).  The Amendment also provides that the employer will be exempted from compensating the employee for unused paid annual leave as long as the employer took relevant measures to encourage the employee to use any outstanding paid annual leave beforehand (Article 61 (2) of the LSA). 

The system to encourage the use of annual paid leave applicable to employees who have worked continuously for less than one year differs from that applicable to general employees in its requirements, as shown in the table below.  In particular, the annual paid leave encouragement system applicable to employees who have worked continuously for less than one year separately stipulates methods to handle annual paid leave accrued after the first written notice.  It is also important to note that, in the case of workplaces which uniformly grant annual paid leave based on the fiscal year, measures to encourage the use of annual paid leave must be implemented based on the actual commencement date of work of relevant employees. 
 

We advise companies to review the Amendment and utilize the Amendment as needed with respect to the annual paid leave for employees who have worked continuously for less than one year.