The expansion of paid leave entitlement following the amendment to the Labor Standards Act
30 Nov 2018
Following an amendment to the Labor Standards Act (hereinafter the “Act”) which came into effect in May 2018, employees with less than a year of service and employees who go on maternity leave can now benefit from an extended entitlement to paid leave.
The amended Act has strengthened the past Act where paid leave for employees with less than two years of service was insufficient and maternity leave was not accounted for when determining the duration of employee service.
Below, we will discuss the key contents of the recent amendment to the Act.
2. Main contents
1) The extension of paid leave entitlement during the first two years of service
Prior to the amendment of the Act, an employee who attended work for no less than 80% of his/her 1st year of service was entitled to 15 days of paid leave in his 2nd year of service. That is, an employee who went on paid leave during his/her 1st year of service would be entitled to 15 days of paid leave less the number of paid leave used during his/her 1st year of service.
However, under the amended Act, an employee who attends work for no less than 80% of his/her 1st year of service is entitled to 15 days of paid leave, regardless of employees being entitled to 1 day of paid leave for 1 month of service period without absence. In other words, an employee may be entitled up to 26 days of paid leave during his/her first two years of service.
This portion of the amendment to the Act is effective for new employees starting his/her service after May 30, 2017.
2) The extension of paid leave entitlement for employees on maternity leave
Before the amendment, an employee who is reinstated from maternity leave was entitled to the number of days of paid leave computed in proportion to the number of days of service before the leave. As such, if an employee was away on maternity leave for a year, no paid leave would be granted for the employee after returning back to work.
Following the amendment however, the number of days of paid leave is determined by the percentage of annual work attendance that takes into account the number of days of service both before and after the maternity leave. Accordingly, the employee can now become entitled to at least 15 days, and up to 25 days of paid leave, in consideration of his/her continuous period of service.
Meanwhile, the addendum to the amended Act specifies that the amendment relating to maternity leave shall be effective from the day in which the employee applies for maternity leave after the law comes into force. However the Ministry of Labor has issued an explanation letter stating that given the nature of subjectivity involved in the application for maternity leave and considering the objective of the amendment, the amendment will be effective from the day in which the maternity leave commences, after the law comes into force.
3. Concluding remarks
Following the amendment, companies must provide employees with paid leave in accordance with the amended Act, and any unused paid leave must be compensated after a year of service has been provided.
In addition, companies must follow relevant accounting standards and recognize in their financial statements the allowance for unused paid leave calculated in accordance with the accounting standards.
Therefore, to avoid any disadvantages from non-compliance of the Act and non-recognition of allowance for unused paid leave in the companies’ financial statements, we advise you to seek a knowledgeable and competent professional’s advice.