The Ministry of Labor issued the Lao-Dong-2-1060131476 Circular of July 12, 2017 (hereinafter, the “Circular”) to communicate that since wages converted from untaken special leave upon termination of the contract are income after the termination of the contract, it is permissible not to include them in the calculation of the average wage.
Article 38, Paragraph 2 of the Labor Standards Law (hereinafter, the “Law”) provides: “Unpaid annual leave in the preceding paragraph shall be arranged by workers, provided that employer, in the light of urgent needs of the business operation or personal factors of workers, may consult and make adjustments with workers.” Paragraph 4 of the same article provides: “The wages for the special leave days of workers which are not taken at the end of the year or upon termination of the contract shall be paid by the employer.” 」。In addition, Article 2, Subparagraph 4 of the Law provides: “Average wage means the amount obtained by dividing the total wage for the six months prior to the day on which an event requiring that calculation occurs by the total number of days in such period.” 」。The so-called ‘total wage” refers to the total wage which may be claimed for the six months prior to the event requiring the calculation. Based on the foregoing, whether the wage is included in the calculation of the average wage is determined by whether a worker’s right to claim wages took place during the six months prior to the day the calculation event occurs.
This Circular further points out that special leave days shall be arranged by the workers themselves. For special leave days arranged by workers in advance or for adjustment to the arranged special leave days in accordance with the proviso of Article 38, Paragraph 2 of the Law, if the employer obtains the workers’ approval to work on such days and pays double wages in accordance with Article 39 of the Law, the wages so additionally paid shall be included in the calculation if such days are appropriate for the average wage calculation period. Therefore, for the number of special leave days not arranged by workers, the wages paid by the employer for the untaken leave days “at the end of the year” are wages for a worker’s work on days where leave is not taken throughout the entire year. When the average wage is calculated, the Law is silent about the portion of such wages that falls within the calculation period for the average wage. Therefore, this shall be negotiated between the employer and the employee.
It was also pointed out in this Circular that when special leave is not completely taken by a worker when the “contract is terminated,” since the wages for untaken special leave days are income generated after the contract is terminated, it is permissible not to included them in the calculation of the average wage.