Unused annual leave pay on termination in China: an employer’s calculation guide

1. Establish eligibility and the correct annual entitlement

The Enterprise Measures require at least 12 months of continuous work. This can include continuous employment with different employers, as the MOHRSS explanation confirms. Do not automatically restart eligibility when an experienced employee joins your China entity. Verify employment history using contracts, social insurance records or other legally effective evidence.

Under Article 3 of the Regulation, cumulative service of at least 1 but under 10 years gives 5 days; at least 10 but under 20 years gives 10 days; 20 years or more gives 15 days. Statutory holidays and rest days are excluded from those leave days. More favourable contractual, collective-agreement or company-policy entitlements must be respected under Article 13 of the Enterprise Measures. Identify statutory leave and additional company leave separately in the calculation.

Check Article 4 exclusions before using that entitlement: statutory winter or summer holidays exceeding annual leave; at least 20 days of personal leave with no wage deduction under the applicable rules; or accumulated sick leave of at least 2, 3 or 4 months for the respective service bands above. The Enterprise Measures also address making up insufficient winter or summer holidays and, where annual leave has already been taken before certain exclusions arise, loss of the following year’s entitlement. Do not treat all sickness or personal leave as disqualifying.

2. Reconcile actual leave and the employer’s scheduling evidence

Article 9 of the Enterprise Measures requires the employer to plan leave with regard to business needs and the employee’s wishes. Where work needs prevent scheduling or require carryover into the next calendar year, employee consent is required. A blank request history does not by itself establish that the employee waived leave or payment. Keep the proposed schedule, communications, approvals and attendance records together.

Article 10 contains a specific exception: the employer arranged annual leave, but the employee, for personal reasons, requested in writing not to take it. In that situation normal wages alone may be paid. A generic handbook clause or silence does not establish those facts. Also keep maternity leave, marriage and bereavement leave, statutory family-visit leave and work-injury suspension with pay out of the annual-leave deduction, as Article 6 requires.

3. Use the termination formula for the current calendar year

Article 12 applies when the employment contract is terminated or ends. The formula is: calendar days elapsed with this employer in the current year ÷ 365 × full-year annual leave entitlement − annual leave already arranged in that year. The fraction below one whole day is not payable. Calendar days are not attendance days, and the statutory denominator is 365. Check the employee’s joining and ending dates before relying on a software balance.

Where leave already arranged exceeds the prorated entitlement, Article 12 prohibits clawing back the excess. Keep any earlier-year balance and its scheduling or payment history separate: the current-year formula does not resolve an earlier-year dispute. Article 5 separately provides a remaining-calendar-days formula for a qualifying new hire’s joining-year entitlement; do not confuse that calculation with the exit calculation.

4. Reconcile the 300% rule with wages already paid

Under Articles 10 and 11, unused statutory annual leave pay is calculated at 300% of daily wage income, including normal wages already paid for the relevant period. If the normal 100% has been fully paid, the additional amount is normally 200%, rather than another 300%. Verify the payment evidence before taking that credit; unpaid normal wages cannot simply be treated as paid.

Daily wage income is the employee’s monthly average wage for the 12 months before payment, excluding overtime pay, divided by 21.75. If service with this employer is shorter than 12 months, use the actual months. The same approach applies to piece-rate, commission and other performance-based pay. Do not substitute basic salary alone without reviewing the pay components, or apply a group-wide workday divisor.

Illustration only: assume a 10-day annual entitlement, 200 calendar days with the employer in the current year, 2 days already taken, no applicable exclusion and no more generous entitlement. The remaining calculation is 200 ÷ 365 × 10 − 2 = approximately 3.48 days; 3 whole days are payable. If the correctly determined monthly average is RMB 10,875, the daily rate is RMB 500. Three days at 300% total RMB 4,500, including RMB 1,500 of normal wages if already fully paid; the additional payment is RMB 3,000. Earlier-year balances are excluded from this illustration.

5. Give payroll and management a supported decision

Prepare a file containing service-history evidence, applicable employment documents and leave rules, joining and termination dates, a year-by-year leave ledger, scheduling and written-decline records, payroll components and payment records. The calculation should identify each input, the normal-wage credit, any additional contractual entitlement and any unresolved earlier-year claim. Keep leave pay separate from severance and other settlement items.

For an overseas management team, the decision is whether leave can still be properly arranged before departure, what payment is due and which records support the amount. Before signing an exit agreement, review both the leave calculation and the wider termination arrangements. An initial consultation can start with the China employing entity, work city, planned departure date, service history and disputed balance; detailed employee documents can follow through agreed confidential channels.