On May 29th, 2018, a new system for calculating annual leave goes into effect.

This post gives an overview of a change to the way annual leave is calculated, focusing on employees in their first and second years.

It is based on an amendment to the Labor Standards Act and a Ministry of Employment and Labor guideline that, as usual, is not available in English:-)

First, we need to understand how the previous system of annual leave worked for new employees.

An employee could take 15 days of paid annual leave in his second year under the old system (this has not changed with the new system).

He could take one day of leave for one full month of work in his first year, but this leave was not separate from his second-year leave. The days taken on leave in the first year had to be deducted from the 15 days taken on leave in the second year.

Essentially, the system was designed to allow employees in their first year to use annual leave that they would earn in the second year in advance (This part changed with the new system).

If one employee joined your company on January 1st of the first year and took one day of leave every month, he will have taken 11 days of leave by the end of the year.

These 11 days should be deducted from the 15 days of leave he is entitled to in the second year. As a result, the total number of annual leaves he can take in the second year is 4 (15 minus 11), not 15.

Based on an amendment to an article on annual leave in the Labor Standards Act, a new system will go into effect on May 29th, 2018.

The amendment removed clause 3 of article 60, which dealt with deducting first-year leave days from those of the second year.

The Labor Standards Act’s amended Article 60 on annual leave is available here.

Article 60 (Annual Paid Leave)
(1) Every employer shall grant any worker who has worked not less than 80 percent of one year a paid leave of 15 days.
(2) Every employer shall grant any worker who has continuously worked for less than one year or who has worked less than 80 percentage of one year one paid-leave day for each month during which he/she has continuously worked.
(3) Where an employer grants any worker a paid leave for the latter’s first year of work, the former shall grant the latter a paid leave of 15 days, including the paid-leave referred to in paragraph (2), and, if the latter has already taken the paid-leave provided for in paragraph (2), shall deduct the number of days of such paid-leave from the said 15 days.

With the clause gone, there is no legal basis to deduct the days of leave taken in the first year from the next year’s 15 days. Therefore the leave days of the first year and those of the second year should be calculated separately.

The total number of annual leave may vary depending on when you joined a company. For example, an employee whose contract starts on January 1st, 2018, is entitled to a total 26 days of leave for the first two years. (11 days of leave for the first year and 15 days for the second year).

This “non-deduction” system applies to employees whose labor contracts start on May 30th, 2017, or thereafter.

When one year passes for them, the new system takes effect, and therefore there is no legal ground to deduct 1st year’s annual leave days from those of the 2nd year.

Unfortunately, someone who joined the company on May 29th, 2017, is not eligible for the new system because when one year passes for them, the old deduction system is still in force.