What leading countries’ laws say about offering extra annual leave

Out-Law Guide | 01 Dec 2022 | 4:45 pm |

Companies around the world are facing increasing difficulty in hiring and retaining workers. Increased holiday entitlement has become one way in which employers compete.

Increased leave can be a powerful incentive to workers who are increasingly seeking a better work-life balance. But companies considering offering it should be aware of the rules governing holiday leave in some of the world’s leading economies.

European law requires EU countries to ensure that employees can claim a minimum annual leave of four weeks. This follows from Article 7 of the EU’s Working Time Directive. Similar laws exist in other jurisdictions.

  • France

    The French Labour Code states that the duration of annual leave is 2.5 working days per month of effective work with the same employer, without exceeding 30 working days per year. All employees are entitled to annual leave, regardless if they have a fixed-term or indefinite term contract or whether they work full time or part time working hours.

    The law also provides for the granting of additional days of paid leave for events such as birth of a child, marriage, sickness of a child, death of a close relative or professional training.

    In addition, companies should check the provisions of the applicable collective bargaining agreement (CBA), which may provide for additional paid vacations, for example, per year of seniority or for employees with young children.

    Provisions from the French Labour Code and the CBA constitute the basic compulsory requirements that all companies should apply. Of course, the employer is not prevented from going beyond the legal minimum and making more favorable arrangements.

    On the one hand, the company may have recourse to collective bargaining to increase the duration of paid leave. It is possible to use objective criteria such as age, seniority or disability. This solution is particularly suitable for companies with a trade union delegate or a social and economic committee to negotiate company-wide collective agreements. It also has the advantage of providing a unified system for all employees of the company and to be an opportunity to settle all issues related to paid leave.

    On the other hand, each employee can individually negotiate additional paid leave days in his employment contract. The interest would be to reserve the benefit of additional days off to certain employees only, but subject to the respect of equal treatment.

    Indeed, in both cases, whether the company negotiates a collective agreement or negotiates with each employee individually, attention must be paid to the principle of equal treatment, according to which two employees in the same situation must receive the same benefit.

    For example, it has been ruled that the mere difference in professional category (executives/non-executives) cannot in itself justify, for the allocation of additional paid vacations to the company's executives only, a difference in treatment between employees placed in an identical situation with regard to the said benefit, as this difference must be based on objective reasons, the reality and relevance of which must be verified by the judge.

  • Spain

    The Royal Legislative Decree 2/2015, of 23 October, approving the revised text of the Workers' Statute Law (Estatuto de los Trabajadores/ET) establishes the minimum annual paid holiday entitlement for each employee in Spain: at least 30 calendar days or 22 working days. However, collective bargaining agreements can regulate a minimum higher than the one established by the ET. In accordance with the Spanish legislation, employees in full-time and in part-time are entitled to the same amount of paid holiday.

    Annual leave is accrued on a monthly basis. For example, an employee entitled to 24 working days annually accumulates a claim of 2 days of holiday per month. However, it is common practice that, in the employee's first year with the company, the employee can take annual leave before having accrued the necessary number of days. Nevertheless, in the event of termination of the employment relationship, if the employee has enjoyed more days of annual leave than accrued up to that time, the employer may claim the return of these days. In the same way, if the employment relationship ends and the employee has accrued days without taking them, the company must compensate the employee economically for those remaining days.

    As a general rule, the right to paid annual leave is an unwaivable and irrevocable right, and the holidays granted to the employee must be taken by the end of each calendar year. Nonetheless, in the event this is not possible, Spanish case law allows for vacation days to be carried over to the following year. In this case, the company establishes a maximum date when the carried over holidays must be taken. After that date the entitlement will lapse for good.

    Besides, the ET includes specific circumstances in which the employee is entitled to paid leave. These are, for example, marriage (15 natural days), death or accident of a close relative (2 natural days), relocation (1 natural day), and for the time needed in the event of carrying out trade union duties or for prenatal examinations and childbirth preparation techniques. Those are the minimum establishes by the ET, which can be extended by collective agreement or agreement with the company.

    The annual leave shall be defined by a mutual agreement between the employer and the employee. In the event that the parties disagree, the social jurisdiction shall set the corresponding dates for the annual leave.

    Those general rules have some exceptions arising from the EU regulations. In the event that the annual leave coexists with an employment contract’s suspension - for example due to illness, birth leave or accident - the employee is entitled to enjoy the annual leave at the end of this situations up to 18 months after the end of the year. 

  • Germany

    The German Federal Vacation Act (Bundesurlaubsgesetz/BUrlG) regulates the minimum annual entitlement to paid vacation for every employee in Germany. Here the actual minimum vacation entitlement depends on the length of the employee`s working week. In a six-day week the entitlement is at least 24 vacation days, whereas in a five-day week it is at least 20 vacation days per year. However, the full entitlement to the mentioned paid vacation only arises for the first time after six months of employment with the company.

    Beyond the minimum statutory entitlement under the BUrlG additional regulations may extend the leave entitlement and also contain specifications for special leave not regulated by statutory law, for example workation or additional leave in case of an employee's own marriage or the death of a close relative. Such regulations are typically found in employment contracts, collective bargaining agreements (Tarifverträge) or company agreements (Betriebsvereinbarungen). Furthermore, there are claims for further vacation days per year for certain employee groups, among them severely disabled employees and underage employees.

    During the employment relationship all annual vacation days under the BUrlG are generally to be taken by employees and granted by employers by the end of each calendar year. However, if, in exceptional cases, urgent operational reasons or reasons relating to the employee prevent this, any remaining vacation days can be carried over to the following calendar year. Yet, in the new calendar year, such remaining vacation days must be taken until 31 March; otherwise, the entitlement will lapse for good.

    However, it is important to know that certain exceptions apply from this rule. Most importantly such exceptions derive from the rulings of the European Court of Justice, for example, due to long term illness of the employee or if the employer has not sufficiently informed the employees of existing vacation entitlements in good time, explicitly and with reference to the threat of forfeiture.

    For any other additional contractual vacation days it is up the contractual parties to regulate the fate of any accrued and untaken vacation days by the end of the calendar year. Here the parties will typically agree on any accrued and untaken additional vacation days to expire by 31 December of each year.

    In principle, during the employment relationship employees cannot demand to have their vacation days paid out instead of taking them during the year. However, if the employment relationship ends and the employee cannot use up the remaining vacation days until the last working day, the employer must pay out such days. This is one of the reasons why many employers in Germany put employees on garden leave after a resignation or termination as any open vacation entitlements can be offset during this period.

  • Singapore

    The Employment Act 1968 (EA) governs the statutory annual leave entitlement in Singapore. The statutory annual leave entitlement is in addition to rest days, gazetted public holidays, and other childcare leave entitlements including but not limited to maternity leave, paternity leave and infant care leave.

    Every employee who has been employed under an employment contract for a period of at least 3 months is entitled to statutory paid annual leave. The entitlement will depend on the individual’s length of service and starts at 7 days for the first full year of service, with one additional day per year up till a maximum of 14 days. Parties are free to negotiate and agree on a more generous annual leave entitlement as long as this meets the minimum standards set under the EA.

    Employees who are protected under Part IV of the EA must be allowed to carry forward a full year’s statutory entitlement to the next 12 month period. Part IV of the EA covers workman earning up to S$4,500 a month, and non-workman who earn up to S$2,600 a month. All managers and executives are excluded.  There is no similar requirement for employees not protected under Part IV of the EA.

    If an employee is dismissed on any ground other than misconduct, and he has accrued but unused paid annual leave, the employer must pay the employee the employee’s gross rate of pay in respect of every day of that leave not taken by the employee.

  • Hong Kong

    The Employment Ordinance (Cap 57) (EO) governs the statutory annual leave entitlement of employment in Hong Kong. Statutory annual leave entitlement is in addition to rest days, holidays, maternity leave and paternity leave entitlement under the EO.

    Every employee who has been employed under a continuous contract for not less than 12 months is entitled to statutory paid annual leave. The length of such entitlement depends on the length of service and ranges from 7 days (for 1 year of service) to 14 days (for 9 years of service). It is up to the parties to agree on any additional contractual annual leave entitlement and the related mechanism. 

    The time of statutory annual leave is determined by the employer after consultation with the employee. The employer shall give at least 14 days’ written notice to the employee before the annual leave period unless a shorter notice period is agreed. Statutory annual leave shall be granted for an unbroken period subject to certain conditions. It can be divided in certain manners if the employee so requests. For example, at least 7 days shall be granted consecutively if entitlement exceeds 10 days.  For annual leave entitlement less than 10 days, up to 3 days of which can be granted separately while the rest shall be granted consecutively.

    The EO also prohibits payment in lieu of the taking of statutory annual leave. However, employees may choose to accept payment in lieu of taking statutory annual leave for any leave day exceeding 10 days in a leave year.  In such circumstance, the employer needs to pay the employee a sum equivalent to his annual leave pay.

    In terms of unused annual leave, while parties can agree on the mechanism for contractual annual leave, any unused statutory annual leave must not be forfeited and will be carried forward to the 12 months following a leave year. The employee can choose to receive payment in lieu of the unused leave or take the unused leave at a time specified by the employer in the absence of agreement.

    Upon termination of employment, an employee is entitled to payment in lieu of unused statutory annual leave irrespective of the reasons of termination for any employment exceeding 1 year. If the employee has been employed for less than 1 year, the employee is entitled to the pro rata payment in lieu of unused statutory annual leave only if the employee has been employed for at least 3 months and the employment is not terminated on the ground of summary dismissal. It is an offence for employers who fail to grant statutory annual leave or to make statutory annual leave payment to employees.

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