Annual Leave Allowance in Korea: Cash for Unused Paid Leave

A discount coupon from a store simply disappears when it expires. Paid leave at work is a different thing entirely. Paid leave is "a legal right to take a day off and still get a full day's pay." If you take leave, you rest and get paid. If you skip it and come to work, you've worked on a day you were entitled to rest.

So leave you couldn't use up within its one-year validity doesn't vanish into thin air. It turns into cash. You gave up your right to rest and came in to work, so you get paid in cash for those days. Korean law formally calls this the "allowance for unused annual paid leave."

Generally, at a workplace with 5 or more regular employees, you earn at least 15 days of annual leave if you attend at least 80% of the year. You use leave on the days you need it during the year, and the money you get for the days left over is what we call the annual leave allowance.

To calculate the allowance, Korean companies use "ordinary wages," which reflect the value of one day of your work. Ordinary wages are pay that is promised for your set work and paid regularly and uniformly. Base pay and various regular allowances fall under it, and it's converted into an hourly or daily rate. The allowance comes down to one idea: your daily pay times the number of leave days left.

For example, say an employee works 8 hours a day and earns 10,000 won per hour in ordinary wages. Daily pay is 80,000 won (10,000 won x 8 hours). If 5 days of leave are left after a year of hard work, you multiply 80,000 won by 5 days and receive 400,000 won as the allowance.

To be more precise, depending on company rules, some employers use average wages instead of ordinary wages, which are based on the actual pay you received over the last 3 months. Still, most workplaces set daily pay using ordinary wages, because the calculation is clear and easy to predict.

Having leave left over doesn't mean every company has to pay you cash. Korea's Labor Standards Act has a leave use promotion system, which encourages workers to actually rest instead of getting paid.

Things change if a company, at the times set by law, asks you in writing to submit a plan for when you'll use your remaining leave, and you still don't take it. Suppose the company also designates specific dates, and you come to work on those days anyway. If the company made it clear that it would not accept your work on those days, it no longer has to pay the allowance, and your leftover leave simply expires.

Also, small workplaces with fewer than 5 regular employees have no legal duty to provide paid annual leave. So unless your employment contract or company rules promise it separately, no annual leave allowance legally arises at a workplace with fewer than 5 employees. This is worth remembering.