China Employee Vacations: Don’t Stop Them. Just Don’t.

China’s Regulation on Paid Annual Leave for Employees (《职工带薪年休假条例》) entitles employees (including dispatched workers) who have worked continuously for one year to paid annual leave. Their statutory vacation period is as follows:

• More than 1 and less than 10 years service: 1 week (5 days) vacation
• More than 10 and less than 20 years service: 2 weeks (10 days) vacation
• More than 20 years service: 3 weeks (15 days) vacation

To be clear, the statutory limits set forth above are for the employee’s total years of employment with anyone. In other words, the years of service are based on the date your employee started in the workforce, regardless of employer. This means that even your employees on probation are entitled to take annual leave, so long as they have worked continuously for one year. During your employees’ annual leave, you as the employer must pay your employees the same amount of wages you would have paid each of them during the normal working period.

If you wish to provide more vacation time than the required time set forth above, you will need to specify that additional vacation time in writing, typically in your company’s rules and regulations. But note that once you specify in writing that you will be providing additional vacation time, you will be required to provide the more generous vacation time exactly as specified.

Employers are required to make arrangements for employees to take vacation time each year. Though it is permissible for your employees to carryover their annual leave for one year, this can be done only with the employee’s consent. Unused vacation time in one year can be carried over only to the next year; any carryover beyond that year is prohibited. It is generally not a good idea to allow your employees to carry over their annual leave because doing so can make tracking difficult and can increase your exposure to penalties if the employee later sues claiming never to have agreed to carry over his or her vacation.

An employer that 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. The daily wage is calculated by dividing the employee’s monthly wage by 21.75, with the monthly wage usually defined as the employee’s average monthly wage (excluding overtime pay) over the 12 months prior to the date on which the employer pays the compensation for unused vacation time. If the employee has worked for the employer for less than 12 months, the average monthly wage will be based on the actual number of months of employee service. If an employer arranges for the employee to take vacation days and the employee submits a written request expressly stating that he or she will not take those days, the employer is obligated only to pay the employee his or her normal daily wage for the unused vacation days.

Bottom line: Your employees are entitled to a yearly vacation and you as their employer should not stand in the way of this, unless you are not worried about having to pay a big penalty.