China Employee Vacations and Resignations

Chinese employment laws require all China employers provide their employees with annual paid leave based on the employee’s total years of service. Employees who have worked more than a year but less than 10 years get 5 days annual leave, employees who have worked between 10 and 20 years get 10 days, and employees with more than 20 years get 15 days. This annual leave schedule applies to all employees, both Chinese and non-Chinese.

The Regulation on Annual Paid Leave for Employees, makes clear that employers are legally obligated to ensure their employees take their annual paid vacation time . This is enforced by requiring employers pay their employees an additional 200% of normal wages for each unused vacation day.

A question our China employment lawyers often get from foreign companies with China-based employees is what happens with required annual paid leave when an employee submits his or her notice of resignation? Must the employer pay the additional 200% of normal wages for each unused vacation day or can it require the soon-to-depart employee take any unused vacation days before leaving for good? Somewhat surprisingly, most locales in China allow employers to require the departing employee take any unused vacations during the resignation notice period (which is usually 30 days).

However, the best way to proceed (and the safest for the employer) is to make sure (beforehand!) that your employer rules and regulations and/or your employment contracts include language making clear that you as the employer can require resigning employees to use up any accrued and unused vacation days during their applicable resignation notice period. Like pretty much everything else having to do with Chinese employment laws, it is nearly always easier/safer to be clear in your employment documents (like your rules and regulations and your employment contracts) so that you do not have to rely on the whims of your local labor bureau or court.

What though should you do about an employee who leaves your company with accrued vacation time but gives you no prior notice of their resignation? It depends on where you are located in China, but in many places such as Shanghai, the employer will not have to pay the employee for unused vacation days. This is because it is the employee who made it impossible for the employer to make any arrangements and it would not be fair to punish the employer for the employee’s unreasonable behavior.

A couple of “quick” things about China employee vacation days. The burden is on you as the employer to keep close track of whether your employees take their vacation days. The best way to stay on top of things is to have your employees use up all of their vacation days each year and for you to document this accordingly. If an employee gives up certain annual paid leave for her own reasons, you should be sure to have that employee sign a document making clear that he or she did so voluntarily. This won’t necessarily work but it is at least something. It also helps to have your employer rules and regulations and your employee contracts written so as to be easy for both your employees and your management to understand. This often means it should be in well-written English for your management and in well-written Chinese for your employees and for the China labor bureau and the courts.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.