Reminders for Employers: Unused Annual Leaves Must Be Paid by Average Salary, Extendable by 1 Year
According to Article 38 of Taiwan’s Labor Standards Act, employers are required to provide annual leave based on an employee’s length of service. The statutory minimum leave entitlement is as follows:
- 6 months to less than 1 year: 3 days
- 1 year to less than 2 years: 7 days
- 2 years to less than 3 years: 10 days
- 3 years to less than 5 years: 14 days per year
- 5 years to less than 10 years: 15 days per year
- Over 10 years: an additional 1 day per year, up to a maximum of 30 days
By law, when the employment relationship ends, the employer must compensate the employee for any unused annual leave, calculated based on the employee’s average wage. This obligation applies regardless of whether the employee resigns voluntarily or not. Employers should calculate unused leave based on the employee’s “date of hire” and “consecutive days of employment”.
The payment is due upon termination of the contract but may also be settled on the company’s regular payroll date. For example, if payroll is on the 5th of each month and an employee resigns on February 20 with 6 unused leave days, the employer must pay for those 6 days on the termination date, or no later than March 5.
For employees still in service, if unused leave remains at the end of the fiscal year, it can be carried over for up to one year only with mutual agreement between employer and employee. Beyond this one-year extension, further postponement is not allowed. If the extended period also expires without the leave being used, the employer must pay compensation for the remaining days.
For instance, if Employee A joined on March 10, 2017, and by March 10, 2025, has accrued 15 leave days but used only 10, the 5 remaining days may be carried over until March 10, 2026, upon mutual agreement. However, if those 5 days are not used by that date, the employer is obligated to compensate them in wages, with no further extension permitted.
