Use-It-Or-Lose-It Annual Leave in Korea
by Brendon Carr
A common question I get from time to time is whether employee leave not used during the year may be forfeited. Prior to the September 2002 Amendment of the Labor Standards Act introducing the 40-hour workweek, the answer had been “no”. Supreme Court precedents overturned the language of the LSA then in effect concerning leave, because there were so many instances where employers had interfered with the employee’s right to use leave.
But part of the Amendment’s objective was to regularize Korea’s working hours and leave system in line with standards in effect in most other countries around the world, and also to spur a leisure culture. Korea’s previous system had encouraged employees to “bank” their annual leave and request payment therefor, instead of using the leave.
So now under the Amendment use-it-or-lose-it leave is part of Korean law. So long as the Amendment is applicable to the workplace, and the employee is notified of the possibility of loss of leave, the leave may be forfeited.
The rule is the employer must notify the employee of leave forfeiture “two months” before forfeiture of the unused leave, after the employee has failed to designate dates for use of leave in response to the employer’s prior written recommendation of dates to use unused leave. If the employee knows of the loss of leave and still doesn’t take leave, that’s his problem.
The timing of the employer’s notice is not later than 10 days into the third month before the leave would lapse; the employee shall be afforded 10 days from receipt of the employer’s notice to respond in writing with a designation of leave dates. This means the first 20 days of the third month before leave lapses are the key days.
Leave in your company probably is calculated on an annual basis according to the calendar year ending Dec. 31, which is customary for most Korean companies. That means October 1-10 is the window to notify employees they may lose annual leave if they don’t use it. HR should send written reminders with suggested dates to use the unused leave during that period, and require employees to revert within 10 days with written confirmation of what dates they will take leave. Anyone who doesn’t respond shall be deemed to have forfeited the leave. This would all be worked out by the 20th and you could then generate letters (or e-mails—e-mail is written communication) to the affected employees.
As this takes place 60 days out, it seems a little short-fused and possibly heartless and an employer could adopt any softer practice you want to give employees more time to confirm their schedules, so long as the employer gives notice in the proper window.
Among its several changes, the Amendment also changed the accrual of annual leave, changing the base entitlement from 10 days to 15 days per year. And the rate of increase has changed, too—from one (1) day per year of service to a maximum of 20 days, to one (1) day per two (2) years of service after the first year to a maximum of 25 days.
From July 1, 2008 the Amendment is mandatory on all workplaces in Korea with 20 or more employees. Employers choosing to adopt the 2002 Amendment in their workplaces smaller than 20 employees shall need to amend their Work Rules, by agreement of the employees, or wait until the Ministry of Labor announces an implementation date for smaller workplaces. But for foreign investors getting set up in Korea the first time, it’s preferable simply to adopt the Amendment’s more employer-friendly provisions on working hours and annual leave entitlement from the get-go.
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