Annual Leave Definition
Annual leave in China is paid vacation leave that eligible employees can take each year while continuing to receive normal wage income. It is granted in addition to statutory public holidays and weekly rest days. Public holidays and rest days should not be deducted from the employee’s statutory annual leave balance.
This distinction is important because many international companies use “PTO” as a broad global HR term. In China, statutory annual leave has its own legal rules. A company may offer more generous paid vacation, but it cannot reduce the statutory minimum through an employment contract, employee handbook, global policy, or informal manager practice.
Eligibility for Annual Leave
Employees generally become eligible for statutory annual leave after they have worked continuously for at least 12 months. The number of days is then based on the employee’s cumulative working years. This means employers should not calculate entitlement only from the employee’s start date with the current company.
For example, an employee who joins a new employer after several years of prior employment may already qualify for statutory annual leave, even if they have not completed one year with the new company. Employers should collect reasonable evidence of prior work history during onboarding, such as previous employment certificates, social insurance contribution records, labor contracts, or other employment history documents where available.
Annual Leave Entitlement
China’s statutory annual leave entitlement follows a 5/10/15-day structure based on cumulative working years.
| Cumulative working years | Statutory annual leave entitlement | Practical employer note |
|---|---|---|
| Less than 1 year | No statutory annual leave | The employer may voluntarily provide company leave, but it is not the statutory minimum. |
| 1 year to less than 10 years | 5 working days | Verify previous work history before treating a new hire as having no entitlement. |
| 10 years to less than 20 years | 10 working days | Update entitlement when the employee crosses the 10-year threshold. |
| 20 years or more | 15 working days | Track statutory annual leave separately from additional company vacation days. |
Annual Leave vs. Public Holidays
Employers in China should separate annual leave, public holidays, adjusted working days, and holiday payroll rules because each category follows a different compliance logic. They may appear together in the same month or even within the same holiday period, but they should not be handled as one generic time-off category.
Annual leave is an employee-specific entitlement based on cumulative working years. Public holidays are national statutory days off. Adjusted working days are official make-up working days published as part of China’s holiday calendar. Holiday payroll rules apply when an employee works during statutory holidays or certain rest-day scenarios. Mixing these categories can lead to incorrect leave deductions, overtime underpayment, and payroll disputes.
| Category | What it means | Should it reduce annual leave balance? | Payroll impact | Employer action |
|---|---|---|---|---|
| Annual leave | Paid vacation entitlement based on cumulative working years | Yes, if the employee applies for and takes annual leave on a working day | Employee receives normal wage during approved annual leave | Track entitlement, approvals, days taken, and remaining balance |
| Statutory public holidays | National holidays designated by the State Council | No | If the employee does not work, normal holiday pay applies; if the employee works, statutory holiday overtime rules may apply | Do not deduct public holidays from annual leave balances |
| Adjusted working days | Weekend days officially converted into working days to create longer holiday periods | Only if the employee applies for leave on that adjusted working day | Treated as a working day for attendance and payroll purposes | Update attendance calendars and HRIS settings before each holiday period |
| Weekly rest days | Regular non-working days, usually weekends depending on the work schedule | No | Different overtime or rest-day rules may apply if the employee works | Do not count rest days as annual leave days |
| Holiday overtime pay | Additional pay required when employees work during statutory holidays or certain rest-day scenarios | No | Calculated under overtime and holiday pay rules, not annual leave rules | Separate holiday overtime records from annual leave records |
For example, if an employee applies for annual leave from Monday to Friday and Wednesday is a statutory public holiday, the employer should normally deduct only four working days from the employee’s annual leave balance. If the following Sunday is an official adjusted working day and the employee also wants that day off, the employee may need to apply for annual leave for that Sunday because it is treated as a working day under the official holiday arrangement.
The key compliance point is that annual leave records should follow working days, while public holiday and adjusted-working-day payroll should follow the official holiday calendar. Employers should monitor the official public holiday schedule and update attendance, payroll, and leave systems before holiday periods begin.
Annual Leave vs. Other Leave Types
For childbirth and childcare entitlements, see maternity and parental leave by province.
Annual leave is different from sick leave, maternity or paternity leave, marriage leave, bereavement leave, and local leave entitlements because it is based mainly on cumulative working years, not a medical event, family event, childbirth, or local family-care rule.
Employers should not combine all paid absences into one generic PTO bucket unless the internal system can still identify the correct legal category behind each absence. Sick leave depends on illness and medical documentation. Maternity and paternity-related leave depend on childbirth and local family-planning rules. Marriage and bereavement leave depend on personal family events. Some cities and provinces also provide local leave entitlements, such as parental leave or elderly-care leave, which may vary by location.
| Leave type | Main trigger | Is it the same as annual leave? | Can it usually be replaced by annual leave? | Employer risk if handled incorrectly |
|---|---|---|---|---|
| Annual leave | Employee’s cumulative working years and continuous work eligibility | Yes | Not applicable | Unused leave compensation, payroll disputes, final settlement errors |
| Sick leave | Employee illness or injury supported by medical documentation | No | Generally no; sick leave should be handled under sick leave and medical period rules | Incorrect wage payment, unlawful absence treatment, medical period disputes |
| Maternity leave | Pregnancy and childbirth | No | No; maternity leave is a protected statutory entitlement | Discrimination claims, unlawful termination risk, benefit and payroll disputes |
| Paternity or childcare-related leave | Birth of a child or childcare responsibilities, depending on local rules | No | No, unless the employee separately chooses to use annual leave beyond statutory or local leave | Local compliance issues and employee relations disputes |
| Marriage leave | Employee marriage | No | Usually no; it should be recorded as marriage leave if the entitlement applies | Incorrect leave balance and inconsistent benefit treatment |
| Bereavement leave | Death of an eligible family member | No | Usually no; it should be recorded separately where applicable | Employee relations risk and inconsistent policy application |
| Local parental, nursing, or elderly-care leave | Local regulations and employee family circumstances | No | No, unless the employee voluntarily uses annual leave in addition to local leave | Local law non-compliance and payroll record errors |
For employers, the safest approach is to keep separate leave codes in the HRIS or payroll system. Annual leave, sick leave, maternity leave, marriage leave, bereavement leave, and local statutory leave should not be merged into one undifferentiated paid time off balance. Separate coding helps payroll calculate wages correctly, helps HR apply the right documentation requirements, and gives the employer stronger evidence if a dispute arises.
This is particularly important for foreign companies using global HR systems. A headquarters system may only support broad labels such as vacation, sick leave, and other paid leave, but China compliance often requires more precise records. Employers should either localize the leave categories in the system or maintain a China-specific leave register that reconciles with payroll each month. The wider framework of China statutory leave laws should be reflected in the employee handbook and payroll process.
Applying for Annual Leave
Employees should follow the company’s internal leave process, submit requests in advance where possible, confirm the requested dates, and prepare a handover plan. The employer should make the process clear in the employee handbook or leave policy, including the application channel, notice period, approving manager, and treatment of urgent or peak-season requests.
Annual leave may be arranged in one continuous period or in separate periods. The employer is responsible for arranging annual leave based on production and business needs while also considering the employee’s preference. As a general rule, annual leave should be arranged within the same calendar year.
If business or production requirements make it genuinely necessary, annual leave can be carried over and arranged across one additional year. Carryover should be documented and should not become a routine way to avoid arranging leave. Employers should keep a record of the business reason, the employee communication, and the updated leave balance.
Employer Approval and Refusal
An employer can manage the timing of annual leave based on business needs, but it should not unreasonably deny statutory annual leave or use approval discretion to eliminate the employee’s entitlement. A compliant annual leave policy should explain how requests are reviewed, who approves leave, how conflicts are handled, and how remaining balances are recorded.
For example, an employer may reasonably ask an employee to avoid annual leave during a critical project launch, payroll closing period, inventory period, or client delivery deadline. However, the employer should then arrange another practical period for the employee to take leave. A repeated pattern of rejecting leave without clear business reasons may create evidence problems if unused leave later becomes a payroll or arbitration dispute.
When Entitlement May Not Apply
China’s annual leave regulations include specific situations where an employee may not enjoy annual leave for the current year. Employers should apply these exceptions carefully and keep written evidence, because misclassification can create wage and leave disputes.
| Situation | Effect on current-year annual leave | Employer documentation |
|---|---|---|
| The employee legally enjoys summer or winter vacation longer than annual leave entitlement | Annual leave may not apply for that year | Confirm the legal nature and length of the vacation. |
| The employee takes at least 20 days of personal leave and salary is not deducted under company rules | Annual leave may not apply for that year | Keep personal leave approvals and payroll records. |
| Employee with 1 to less than 10 cumulative working years takes sick leave for at least 2 months | No annual leave for that year | Track sick leave dates and medical documentation. |
| Employee with 10 to less than 20 cumulative working years takes sick leave for at least 3 months | No annual leave for that year | Apply the correct service band. |
| Employee with 20 or more cumulative working years takes sick leave for at least 4 months | No annual leave for that year | Review carefully before treating protected leave as ordinary sick leave. |
Unused Annual Leave
Unused annual leave is one of the most common sources of employment disputes in China. If the employer cannot arrange annual leave due to business needs and the employee agrees not to take it, the employer must pay annual leave wage remuneration for the unused statutory annual leave days.
The regulation refers to 300% of the employee’s daily wage income. In payroll practice, this figure includes the normal wage already paid for the working day. The additional payment is therefore often calculated as 200% of the daily wage for each unused statutory annual leave day. The China Legal Service platform explains this treatment and the daily wage conversion method.
A practical formula is:
Unused statutory annual leave compensation = unused statutory annual leave days × daily wage × 200% additional payment
This assumes the employee’s normal salary has already been paid. If payroll has not paid the normal wage component, the calculation must be reviewed carefully.
Calculating Unused Leave Pay
For unused statutory annual leave compensation, daily wage is generally calculated by dividing the employee’s monthly wage by 21.75 days. The monthly wage usually refers to the employee’s average monthly wage over the 12 months before the unused leave compensation is paid, excluding overtime pay. If the employee has worked for the employer for less than 12 months, the actual months worked are used.
Payroll should confirm four things before payment: the employee’s statutory entitlement, leave already taken, the wage base, and whether the leave was unused because of business needs or because the employee personally declined arranged leave in writing.
Voluntary Refusal of Leave
If the employer has arranged annual leave but the employee does not take it for personal reasons and provides written confirmation, the employer may only need to pay the employee’s normal wage income for that period. The written record matters. A verbal statement such as “I am too busy to take leave” is weak evidence if a dispute later arises.
Employers should use a clear written confirmation that states the annual leave was arranged, the employee chose not to take it for personal reasons, and the employee understands the leave balance treatment. The document should be kept with the employee’s leave and payroll records.
Joiners and Leavers
When an employee joins or leaves partway through a calendar year, annual leave is generally handled on a pro-rated basis. The typical formula for unused leave at termination considers the number of calendar days worked for the employer during the year, the employee’s full-year statutory entitlement, and annual leave already taken.
A commonly used approach is:
Pro-rated annual leave = calendar days worked for the employer during the year ÷ 365 × full-year statutory annual leave entitlement – annual leave already taken
Fractions of less than one full day are generally not paid as unused annual leave compensation. If the employer has already arranged more annual leave than the pro-rated entitlement, the excess is generally not clawed back from the employee.
Final payroll should include a leave balance review before salary settlement. HR and payroll should check annual leave entitlement, leave already taken, remaining statutory leave, extra company leave, final salary, bonus, severance, social insurance, housing fund, and tax treatment. This is where China payroll outsourcing can help companies align leave records, salary calculations, payslips, IIT withholding, statutory contributions, and final settlement.
Annual Leave Records
Annual leave is not only an HR approval issue. It is also a payroll and evidence issue. Employers should keep complete records showing leave entitlement, leave requests, approvals, attendance, leave usage, leave balance, employee confirmations, and unused leave calculations.
Strong documentation helps defend wage, overtime, absence, termination, and leave disputes. A company may have the correct policy but still face risk if it cannot prove what was requested, approved, taken, refused, paid, or carried forward. HROne’s guide to China HR documentation requirements explains how attendance, leave, payroll, and employee-file records support employment compliance.
Annual Leave Policy Checklist
A good annual leave policy should be operational, not just legal. It should help employees understand their rights and help managers make consistent decisions.
- Eligibility rules, including continuous work and cumulative working years
- Documents used to verify previous work history
- Statutory entitlement by service band
- Rules for company-provided extra annual leave
- Application method and minimum notice period
- Approval authority and escalation process
- Rules for public holidays, rest days, and adjusted working days
- Peak season or business-critical period handling
- Carryover rules and annual scheduling expectations
- Unused annual leave compensation rules
- Written refusal or waiver process where legally appropriate
- Pro-rated calculation for joiners and leavers
- Payroll calculation and final settlement treatment
- Recordkeeping responsibilities for HR, payroll, and managers
Company Extra Vacation
Not all paid vacation is statutory annual leave. Many employers provide additional paid vacation beyond China’s statutory minimum, especially for senior, technical, regional, or internationally managed roles. This can be a strong retention benefit, but the policy should define how extra leave works.
The company should state whether extra leave can be carried forward, whether it expires, whether it is paid out at termination, whether statutory leave is used before company leave, and whether different groups of employees receive different benefits. Statutory annual leave should be tracked separately so payroll can identify which unused days are legally protected.
Annual Leave vs. Holiday Pay
Annual leave pay and holiday pay are related but not identical. Annual leave pay refers to normal wage during approved paid annual leave, or compensation for unused statutory annual leave where required. Holiday pay may refer to wages during statutory public holidays or overtime pay when an employee works on a statutory public holiday.
Public holiday work is subject to separate rules. Employers should not assume that compensatory leave can replace statutory public holiday overtime pay. The rules around holiday pay in China should be managed separately from annual leave balance administration.
Foreign Employees in China
Foreign employees lawfully employed in China should generally have their employment terms managed under China’s employment-law framework, including annual leave, payroll, working hours, and statutory benefits where applicable. Immigration compliance and employment compliance are separate. A valid work permit does not replace annual leave compliance, and a compliant employment contract does not replace immigration compliance.
For foreign companies without a local entity, a China EOR service can provide a compliant local employment structure and administer contracts, payroll, leave records, social insurance, and HR documentation. Companies with an existing China entity may use a China PEO service to support HR administration, payroll, benefits, employee records, and compliance execution.
Common Employer Mistakes
- Calculating annual leave only from service with the current employer
- Failing to verify prior work history during onboarding
- Deducting public holidays or rest days from annual leave balances
- Failing to account for adjusted working days during public holiday periods
- Mixing statutory annual leave with extra company vacation without clear rules
- Combining annual leave, sick leave, maternity leave, and local leave into one unclear PTO category
- Not arranging leave during the year and assuming unused leave simply expires
- Rejecting leave requests without a documented business reason
- Failing to obtain written confirmation when an employee personally declines arranged leave
- Using the wrong wage base for unused annual leave compensation
- Ignoring annual leave during final salary settlement
- Leaving managers to approve leave inconsistently without HR oversight
Employer Action Steps
Employers should treat annual leave as part of the full employment lifecycle. The process should start at onboarding, when cumulative work history is collected. It should continue through monthly attendance and payroll, when leave balances are updated. It should be reviewed before public holidays, when adjusted working days may affect scheduling. It should be closed carefully at offboarding, when unused leave may affect final pay.
For international employers, the biggest risk is often not the statutory table itself. The risk is inconsistent execution across headquarters, China managers, payroll vendors, and local HR records. A compliant system should make annual leave entitlement visible, approval decisions traceable, payroll treatment accurate, and final settlement defensible.
HROne supports foreign companies hiring and managing employees in China through EOR, PEO, payroll outsourcing, HR administration, onboarding, offboarding, and compliance support. Annual leave is a narrow topic, but it often reveals whether the broader HR and payroll system is ready for China’s employment-law environment.
FAQ: Annual Leave in China
How many days of annual leave do employees get in China?
Employees with 1 to less than 10 cumulative working years receive 5 days of statutory annual leave. Employees with 10 to less than 20 years receive 10 days. Employees with 20 years or more receive 15 days.
Are public holidays counted as annual leave in China?
No. Public holidays and weekly rest days are not counted as statutory annual leave. If annual leave overlaps with a public holiday, only the approved working days should normally be deducted.
How should employers handle adjusted working days during public holidays?
Adjusted working days are treated as working days under the official holiday arrangement. If an employee wants to take an adjusted working day off, the employer may treat it as annual leave if the employee applies and the leave is approved.
Does annual leave depend only on service with the current employer?
No. Annual leave entitlement is based on cumulative working years. Prior work history can matter, so employers should verify employment history during onboarding.
Is annual leave the same as sick leave or maternity leave?
No. Annual leave is based on cumulative working years. Sick leave, maternity leave, paternity-related leave, marriage leave, bereavement leave, and local family-care leave are separate categories with different triggers, documentation requirements, and payroll treatment.
What happens if annual leave is unused?
If the employer cannot arrange statutory annual leave due to business needs and the employee agrees not to take it, unused annual leave compensation may be required. The legal 300% figure includes normal wage already paid, so payroll often calculates the additional payment at 200% of daily wage.
Can an employer refuse annual leave in China?
An employer may manage leave timing based on business needs while considering the employee’s preference. Refusal should be reasonable, consistent, and documented. Employers should not use approval discretion to eliminate statutory annual leave rights.
Should unused annual leave be paid when an employee leaves?
Yes, if statutory annual leave remains unused and compensation is required. HR and payroll should review pro-rated entitlement, leave already taken, unused statutory leave, and final salary settlement before the employee exits.
