A relaxed workplace does not cancel pay for unused annual leave

This guide is for employers and HR staff in Korea, and for employees who leave a job with annual leave still unused. Korean law ties annual leave to attendance on scheduled working days. A company cannot refuse to pay for unused leave just because hours and schedules were relaxed. Figures are as of October 2026.

How annual leave arises

Under Article 60 of the Labor Standards Act (근로기준법), an employer must give 15 days of paid annual leave to an employee who came to work on 80% or more of the days in a year. An employee who has worked for less than one year, or who attended less than 80%, gets 1 paid day for each month of full attendance. From the third year, 1 day is added for every 2 years worked after the first year, up to 25 days in total.

Two limits matter for small companies:

• The annual leave rules apply to workplaces that regularly employ 5 or more workers. Article 60 does not apply to workplaces with 4 or fewer.
• Employees whose scheduled hours average less than 15 a week over 4 weeks get no annual leave.

Some periods count as attendance even without work: time off for a work injury or work-related illness, maternity leave, parental leave (육아휴직), and hours cut under reduced working hours for childcare or pregnancy (Article 60(6)).

Attendance means days worked, not office culture

The Supreme Court measures attendance against the annual scheduled working days (연간 소정근로일수). These are the calendar days of the year minus the days on which there is no duty to work under the law, a collective agreement or the work rules (취업규칙). The court then asks on what share of those days the employee actually worked (Supreme Court ruling 2011Da4629, December 26, 2013).

So the question is not whether the office was relaxed about start times. If an employee worked from home or adjusted hours with the company's knowledge, and actually did the work, those days are days worked. Korean courts look at substance rather than form in labor cases. Whether someone is a worker under the Labor Standards Act depends on whether they provided work for wages in a subordinate relationship, not on the name of the contract (Supreme Court ruling 2004Da29736, December 7, 2006).

When an employee leaves

• Unused leave becomes pay. If employment ends after the employee has earned leave but before using it, the employee can claim an allowance for all the unused days (Supreme Court ruling 2003Da48549, May 27, 2005).
• The 15 days arise on the day after the year of work ends. If employment ends before that day, there is no claim for those 15 days, so a worker on a one-year fixed-term contract gets at most 11 days (Supreme Court ruling 2021Da227100, October 14, 2021).
• The allowance must be paid within 14 days of leaving, together with wages and all other money owed (Article 36). The deadline can be extended only by agreement, when there are special circumstances. Late payment carries interest of 20% a year (Article 37).

Penalties are heavy. From October 8, 2026, failing to settle money owed within 14 days of departure is punishable by up to 5 years in prison or a fine of up to ₩50,000,000 (Article 107). Not granting annual leave is punishable by up to 2 years in prison or a fine of up to ₩20,000,000 (Article 110).

What a company would need to show

A company that refuses to pay must be able to show that the employee did not meet the attendance requirement. In practice, the records are in the employer's hands:

• The wage ledger (임금대장) must record each employee's working days and working hours each time wages are paid (Article 48 of the Act and Article 27 of the Enforcement Decree). Workplaces with 4 or fewer workers may leave out the hours.
• Employment contracts, wage ledgers and documents on leave must be kept for 3 years (Article 42 of the Act and Article 22 of the Enforcement Decree).

"The atmosphere was relaxed" is not evidence that attendance fell below 80%. A contract term below the legal standard is also void for that part (Article 15), so a contract cannot take annual leave away.

How to prevent disputes

1. Match the contract to actual practice. If you allow flexible hours, set the system out in writing. Under the selective working hours system (선택적 근로시간제, Article 52), employees choose their own start and finish times. It needs a basis in the work rules and a written agreement with the employee representative (근로자대표). The settlement period is up to 1 month, or up to 3 months for research and development of new products or technology.
2. Record working days under flexible arrangements too, so you can show who worked when.
3. Use the leave promotion procedure (연차 사용촉진, Article 61). Within 10 days from the point 6 months before the one-year use period ends, tell each employee in writing how many days are unused and ask them to choose dates and inform you. If the employee does not reply within 10 days, set the dates yourself and notify the employee in writing at least 2 months before the period ends. For leave earned in the first year of work, the request starts from 3 months before the first year ends and your notice is due 1 month before; shorter deadlines apply to days earned after the request.

If you complete every step and the employee still does not take the leave, the unused days lapse without pay. This exemption covers leave that lapses at the end of its use period. Days still unused when an employee leaves before then are paid under the rule above.

Checklist

• Count your regular workers: the annual leave rules apply from 5.
• Calculate attendance on scheduled working days, using your own records.
• Keep a wage ledger with working days and hours, and keep leave records for 3 years.
• Put flexible work arrangements into the work rules and a written agreement.
• Send leave promotion notices in writing and on time.
• Pay unused leave within 14 days of an employee's departure.