Annual Leave Use Promotion System
Annual Leave Usage Promotion
What is the annual leave use promotion system?
- Every step must be followed to be exempt from the compensation obligation
- Requirements: timely notice, written form, and leave employees can actually take
- If people can’t actually take leave, you have a staffing problem, not a promotion problem
Adopting annual leave promotion moves leave management from a December settlement task to year-round schedule management. Instead of calculating unused days in cash at year-end, HR’s real work becomes checking remaining days in July and October and pinning down who will take leave and when. The allowance budget line shrinks, but leave bunches up in the second half and disrupts production and delivery schedules. That makes this a system where line managers’ calendars have to change before finance’s do.
The procedure has two steps. For employees with one year or more of service, the employer has 10 days, counting from 6 months before the leave period ends, to notify each person of their unused days and ask in writing that they schedule them. If an employee does not reply within 10 days, the employer sets the dates itself and notifies them in writing no later than 2 months before the period expires. Employees with less than one year of service, who can earn up to 11 days, follow a separate promotion schedule. Companies that run leave on a fiscal-year basis also calculate differently from those that use the hire date, so the list of eligible employees differs from the start. Days replaced with leave on specific dates under a written labor-management agreement fall under leave substitution (Article 62), not promotion, which is a different mechanism.
The point where this most often breaks down in practice is the designated day itself. Suppose the notice was flawless, but the employee came in and worked that day and the manager accepted the work without a word. The company is then treated as not having refused the labor, and the obligation to pay allowances remains intact. If one company-wide groupware announcement stands in for the first written request, or a team leader’s verbal "use it whenever you like" is treated as notice, the individual written-notice requirement is not met and the entire promotion is deemed invalid. The company then has to pay back, retroactively within the statute of limitations, the allowances it thought it had saved. Detailed requirements may be amended, so check the latest laws and regulations each year before implementation.
Inwoo LeeLeadership, communication, and performance management expert
Jongmu KimCorporate talent development and job skills expertThe Labor Standards Act (Article 61) provides that an employer can be released from the obligation to pay for unused leave by completing a prescribed procedure: notifying employees of their unused days at set points before the leave period expires, and designating when they must take it.
Company A is a machine-parts manufacturer with 210 employees and about KRW 48 billion (≈ US$35,912,000) in annual revenue. Despite running the promotion procedure for three years, it still paid KRW 230 million (≈ US$172,100) in unused leave pay the prior year, and its usage rate stayed at 61%. (Hypothetical example)
- When the HR head went through last year's pay records, 78% of the payout came from three production lines running two shifts. The person in charge replied, "We emailed the promotion notice to all 210 employees."
- On June 25, the first notice moved from a company-wide announcement to an individual e-approval form showing each person’s remaining days. The list of 47 people who had not replied after 10 days went straight to their team leaders.
- When the company-designation notice went out on October 20, the head of production told each line meeting, "Pulling people off on the designated day is the team leader’s responsibility," and the 2 shift vacancies were filled in advance by hiring contract workers.
- To the 9 employees who came in on the designated day, the floor supervisor said on the spot, "Today is not recognized as a working day," sent them home, and left the signed confirmation with HR.
- That year, the leave usage rate rose from 61% to 88%, unused-leave pay fell from KRW 230 million (≈ US$172,100) to KRW 41 million (≈ US$30,700), and internal inquiries disputing the validity of the promotion dropped from 12 to 1.