Year-End Collective Leave and Annual Leave Substitution Agreements · Procedure for Holiday Substitution and Annual Leave Use Agreements
Year-End Collective Shutdown and Substitution of Annual Leave
What is year-end collective leave?
- Annual leave substitution and holiday substitution are different mechanisms
- No written agreement with the employee representative? It counts as a suspension
- Identify employees without leave and departments that must stay open first
A well-designed collective leave changes the 'name of the day off.' Even if employees are off on the same December 29, it counts as annual leave used if a written agreement with the employee representative substituted it. If the company simply closed without an agreement, it is a business suspension caused by the employer, and suspension pay is owed. Annual leave substitution converts specific working days into annual leave days, while holiday substitution swaps a public holiday with another working day, so the governing provisions and effects differ. Both take effect only with a written agreement with the employee representative, and neither an internal notice nor individual consent forms can replace it.
Design starts with the calendar. If you designate the working days between public holidays, such as December 25 and January 1, as substituted annual leave days, you create one continuous break. The problem is new hires with no leave to substitute and employees who have already used all of theirs. To make them take unpaid time off or borrow next year’s leave, you need separate consent and a basis in the work rules. Without both, those days must be treated as a business suspension. Where some departments cannot close, such as production or customer service, employees who work on a substituted holiday may be entitled to holiday work premium pay, so consider setting different dates by department.
Training and HR managers deal with this at year-end because it is tied to annual leave promotion. Substituting annual leave through a collective leave reduces unused leave and lowers the cost of leave payouts, and some companies build it into their annual leave promotion process. However, promotion is a separate procedure requiring individual written notices and designated leave dates, so a collective leave agreement does not replace it.
Where practice goes wrong is stopping at a single notice. If all there is, is a notice saying “Company closed Dec. 30–31, treated as annual leave” and no written agreement, those two days cannot be deducted from annual leave, and you have to consider closure allowance instead. Many companies have never designated who the employee representative is, so there are cases where the person who signed the agreement had no standing as a representative, making the agreement itself invalid. Figures and procedures such as the closure allowance rate and the requirements for holiday substitution may be amended, so check the latest Ministry of Employment and Labor guidance and consult a labor attorney.
Jongmu KimSpecialist in corporate talent development and job competency building
Hwi KimCEO of HRDIST & talent development system consultantUnder the Labor Standards Act, an employer may substitute specific working days for annual leave through a written agreement with an employee representative. Replacing a public holiday with a specific working day likewise requires a written agreement of the same kind. Year-end collective leave is a practical design that applies these two provisions to the year-end calendar.
Consider a hypothetical case. Company A, an advertising agency with 180 employees, has closed the whole company for three days in the last week of December every year. Until last year it only sent a notice saying “treated as annual leave.” This year, an employee who left in October filed a complaint with the labor office, arguing that the three-day deduction was invalid in the annual leave pay settlement, and the HR team had to review the procedure from scratch.
- The HR manager showed the labor attorney the past three years of notices. When told there had never been a written agreement with an employee representative, they asked, “So is every day of leave we have deducted so far a problem?” The answer was yes.
- The company paid the complainant three days of annual leave pay. Instead of refunding the past three years of deductions to all current employees, it agreed to follow the proper procedure starting this year. The refund would have covered 497 days of annual leave.
- In early November, the company held a vote of all employees to elect a new employee representative, then signed a written agreement designating December 29–31 as substituted annual leave days. The 11 new hires agreed to borrow from next year’s leave.
- For the 9 media team members who must stay available to clients, the agreement included a department-level substitution clause moving their days off to the second week of January. The team lead said, 'If we tell them all to take the same days off, our advertisers won’t stand for it.'
- After this year’s collective leave, unused annual leave fell 31% year over year and annual leave payouts dropped by about KRW 42 million (≈ US$31,400). There were no complaints or objections related to the leave.