Unused annual leave pay is a common sticking point when processing departures. How many days remain, what a single day is worth, and by when it must be paid rarely resolve together.
The formula itself is simple: daily ordinary wage × unused days. What goes wrong in practice is not the formula but determining the remaining days and deciding which allowances count as ordinary wage.
The obligation to pay depends on whether usage promotion was lawfully carried out.
If the written promotion procedure was completed under Article 61 of the Labour Standards Act and the leave consequently expired during employment, no allowance is owed for the expired portion.
Departure is different. If an employee leaves before the leave period ends, unused leave must be settled as an allowance even if promotion took place. Because leave can no longer be taken, the remaining days are fixed at once by subtracting days used from leave accrued as of the departure date, without waiting for expiry.
| Condition | Accrual |
|---|---|
| 80%+ attendance over one year | 15 days |
| Under one year of service, or attendance below 80% | 1 day per month of full attendance |
| 3+ years of service | +1 day every 2 years, up to 25 days |
Absent a separate provision in employment rules, one day of leave pay is calculated at ordinary wage. For a 40-hour workplace, monthly contractual hours are 209.
Daily ordinary wage = monthly ordinary wage ÷ 209 hours × 8 hours
The frequent error is the scope of "monthly ordinary wage." It includes not only base pay but allowances agreed to be paid regularly and uniformly as consideration for contractual work. Calculating on base pay alone, excluding meal or fixed allowances, can underpay.
| Item | Included | Test |
|---|---|---|
| Base pay | Yes | Paid regularly and uniformly for contractual work |
| Fixed allowances (position, qualification) | Yes | Included if paid regularly and uniformly to those holding the qualification or position |
| Meal allowance | Possibly | Included if paid as a flat amount to all regardless of attendance; excluded if reimbursement of actual cost |
| Regular bonus | Possibly | Included if regular and uniform; an employment-on-date condition does not by itself negate ordinary wage status |
| Performance bonus | No | Excluded where payment or amount varies with results |
In a December 2024 en banc decision, the Supreme Court abolished the "fixedness" requirement in determining ordinary wage.
A condition requiring employment on a particular date no longer excludes pay from ordinary wage by itself. Pay agreed to be received regularly and uniformly where the employee fully provides contractual work is included.
Workplaces that have been excluding conditional regular bonuses should re-examine their calculation.
Remaining days differ between an anniversary basis and a fiscal-year basis. Workplaces on a fiscal-year basis must recalculate so the employee is not disadvantaged at departure.
Under Article 36, failure to pay within 14 days of the departure date creates wage arrears exposure.
If the written procedure under Article 61 was completed and leave expired during employment, no allowance is owed for that portion. But if the employee leaves before the leave period ends, remaining leave must still be settled as an allowance.
At ordinary wage unless employment rules provide otherwise. For a 40-hour workplace: monthly ordinary wage ÷ 209 hours × 8 hours.
The 'fixedness' requirement for ordinary wage was abolished. Pay is no longer excluded merely because it carries a condition of employment on a particular date.
Within 14 days of the departure date under Article 36; missing it creates wage arrears exposure.
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