While providing legal advisory service on labor law, I have been asked which is the better working condition, monetary compensation or guaranteed vacation for annual leave. In this case, I always explain that the use of vacation is a better working condition than monetary compensation. The reason is that the purpose of annual leave is to recover the mental and physical health of employees through leave, not to compensate wages through monetary compensation. Even in the International Labor Organization(ILO) Paid Leave Convention(Article 132), annual leave is guaranteed as the basic principle, and monetary compensation is allowed exceptionally like resignation, etc. In the revised Labor Standards Act(LSA) in 2003, according to a written agreement with the workers' representative, a method of compensating with vacation instead of paying wages for overtime, holiday work, and night work was introduced. Also, the Government Employee Service Regulations also introduced in 2015 that the number of unused annual leave days out of the number of days for which annual leave compensation is granted can be carried over to the following year, saved as of the last day of the year, and used.

Along with this trend, a bill to expand and reorganize the compensation leave system under the Labor Standards Act to the vacation saving account system for working hours was submitted in 2016. This bill supplements the current 'compensatory leave system' to allow workers to accumulate time equivalent to paid leave in addition to extended, night and holiday work and use it as leave if necessary, or supplement it with work after using the leave first. Unlike the existing compensatory leave system, this bill has a method of using vacation first and then repaying it with extended, holidays and night work, like a bank's negative passbook. It is expected that it will not be easy to legislate this because there is a possibility that it will be in the form of a flexible working system.

Ⅱ. The Compensatory Leave System and the Vacation Saving Account System for Working-hour under the Current Law

1. The compensatory leave system under the current law

The compensatory leave system is a system introduced according to a written agreement with the workers' representative in which vacation is paid in lieu of wages for overtime work, night work, and holiday work for which additional wages must be paid. The specific implementation method for compensatory leave must be agreed upon in writing with the employee representative, and since there is no description of the detailed implementation method, the labor and management can freely decide within the scope of the existing Labor Standards Act. The contents of the written agreement with the workers' representative regarding the implementation of the compensatory leave system should include ①the scope of eligible workers②the scope of the compensatory working hours ③the settlement period and ④the method of using the compensatory leave.

⑴ Scope of eligible workers: The scope of eligible workers can be set whether to apply uniformly to all workers or only to desired workers.

⑵ Scope of compensatory working hours: The working hours subject to compensation are overtime, holiday, and night work. It is decided whether or not to pay the entire additional wage paid in addition to the contractual working hours.

⑶ Settlement period: It is decided whether to make short-term or long-term compensation periods for accumulation possible. In this case, it shall be less than three years in consideration of the extinctive prescription of the wage.

⑷ How to use compensatory leave: It is decided whether to use the accumulated compensatory leave individually or collectively. In addition, measures necessary for the company to be used for a long period of time are described so that a long-term leave can be guaranteed. In addition, it includes the contents of monetary compensation for the compensatory leave not used during the settlement period of the compensatory leave.

2. Vacation saving account for working hours

In order to change the compensatory leave system to the vacation saving account system for working hour, it must be used within the framework of the current law on the premise of a labor-management agreement. The most problematic are how long additional wages can be saved and the company's long-term vacation guarantee policy. When changing the compensatory leave system to the vacation saving account system for working hours, the current law requires the settlement period for vacation and the monetary compensation for unused vacation. The Ministry of Employment and Labor(MOEL) considers it positively to save and use overtime, holiday work and night work. The MOEL translates it legal that the employer allows the employees to use compensatory leave in the following year for the accumulated amount equivalent to overtime, night work and holiday work hours for one year, and if not used, to be paid with monetary compensation for unused leave on the first regular wage payment date of the next following year, according to a written agreement with the workers' representative. Therefore, the employer must ensure that the compensatory leave saved in return for the worker's overtime, holiday work and night work in a specific year can be properly used for the next three years. In consideration of the extinctive prescription of the wage claim, wages that have not been used for 3 years must be paid for. Even if leave is not used due to reasons attributable to the employee, compensation shall be paid for the remaining compensatory leave. Even if labor and management agree that 'the employer is not obligated to pay wages for any compensatory leave not used by the employee without a cause attributable to the employer within the period of use of the compensatory leave', such agreement has no effect. In view of this purpose, the compensatory leave accrued for one year each year can be used for three years thereafter, and wages can be compensated for the unused leave for three years in consideration of the statute of limitations.

Ⅲ. Annual Leave and the Vacation Saving Account System under the Current Law

1. The annual paid leave system under current law

The purpose of the annual leave system is to guarantee sufficient leave to workers who are exhausted from long-term work so that they can recover their mental and physical health, while at the same time guaranteeing the social and cultural life of workers. Convention No. 132 of the ILO requires that two weeks of undivided annual leave be secured. Even in the case of public officials in Korea, the use of consecutive annual leave is guaranteed, and if an application is made for the use of consecutive annual leave of more than 10 days three months in advance, the head of an administrative agency must approve it unless there are special circumstances. 

Under the annual paid leave system, workers with less than 1 year of employment receive 1 paid leave every month, and workers with more than 1 year of employment receive 15 paid leave if 80% or more of their work is completed in 1 year. In addition, one accrued leave is granted every 3 years of continuous work, and a maximum of 25 is granted. If the vacation is not exercised for one year, it is extinguished and converted into a right to claim monetary compensation(Article 60 of the LSA).

A system to promote the use of annual paid leave(Article 61 of the LSA) has been introduced so that all the leave can be used within one year of the validity period of the annual leave. The purpose of this action to promote the use of annual paid leave is to explain that the purpose of annual leave is to maintain the mental and physical health of employees through the use of the leave, not to receive additional wage compensation. An employee shall notify his/her vacation plan 6 months prior to the period in which the annual leave can be used and use it. Nevertheless, for unused leave within two months of validity, the employer can designate the time of leave for the unused leave and force the employee to use his/her unused leave within valid period. If the employee does not use the leave despite the employer's measures to use the leave, the unused leave is extinguished.

2. The leave saving account system for annual leave 

In order to use annual leave as a vacation saving account system under the current law, as the current period of use of annual paid leave is one year, and it is converted into monetary compensation when this validity period expires, this is up to whether or not unused annual leave can be carried over to the following year, which is the core content of the system. In this regard, the MOEL provides a guideline that it is possible to carry over unused annual leave and use it. Here, it is a violation of the law to pay vacation allowance in advance before the right to claim annual paid leave expires and not to grant the same amount of vacation leave. However, it is considered legal to agree between the parties(employer and employee) to carry over and use unused annual leave instead of receiving monetary compensation. In addition, in the measures to promote the use of annual paid leave, the Labor Standards Act stipulates that the unused annual leave will expire if the employee arrives to work on the designated vacation day and provides work. However, even though the employer has taken measures to promote the use of annual leave, the court judges it very strictly. The court holds that the employer has an obligation to compensate for the unused annual paid leave if the employer has received the worker's labor provision without any objection to the unused annual paid leave. 

Therefore, judging based on administrative interpretations and judicial rulings, it can be said that the vacation saving account system for annual leave is sufficiently possible even within the current law. However, in the implementation of this system, the individual consent of the employees is required, not the written agreement with the workers' representative. Carrying over unused annual leave and using it as leave is the same as individual workers' wage claims, so the consent of the individual workers is required. At the end of the period of use of annual leave, the annual leave converted into wage bonds can be accumulated for 3 years and used as long-term leave.

A method that should be taken into consideration when introducing this system is the vacation saving account system for civil servants. In addition to the recommended number of annual leave, unused annual leave can be deposited in a saving account for up to three years, allowing for long-term vacation. For an example, the number of vacation days for civil servants who served over 6 years is 21 days, and excluding the recommended 10 days, if they save 11 days a year and deposit a total of 33 days for 3 years, they can go on vacation for more than a month at a time. Because of this positive result, this vacation saving account system has been expanded from government organizations to public institutions and is widely used.

Ⅳ. Applications

1. Introduction of the vacation saving account system for working hours

In accordance with Article 57(Compensatory Leave System) of the Labor Standards Act, the vacation saving account system for working-hour can be introduced through a written agreement between labor and management, and the application is as follows.

Representative Director ○○○ of A Co., Ltd. and Representative □□□ of A Workers Co., Ltd. agree on the implementation of the compensatory leave system pursuant to Article 57 of the Labor Standards Act as follows.
1. Scope of eligible workers : All regular employees of the company are covered.
2. Scope of compensatory working hours : Overtime work that exceeds the contractual working hours, or holiday work in which work is provided on a statutory holiday or contractual holiday. However, this does not include night work allowances for field workers.
3. Settlement period : The settlement period is from January 1 to December 31, and the period of use for vacation shall be within one year of the year following the end of accumulation. Unused leave within this period of use shall be compensated in money in the first month after the end of the period of use of leave.
4. How to use compensation leave : The company guarantees 10 days of summer vacation to ensure long-term vacation for workers.In case of requesting for other long-term leave, the leave request must be made at least 3 months in advance, and the company guarantees the leave unless there are special circumstances.
April 1, 2022
A Co., Ltd. CEO ○○○ / A Co., Ltd. employee representative □□□

2. The vacation saving account system for annual leave and the long-term annual leave guarantee regulations introduced by Public Institutions

Article 21(Saving of Annual Leave)
①An employee may save and use a portion of unused annual leave for up to three years as of the last day of the year.
②The saved annual leave that is not used within two years after the period for saving up to three years under paragraph ① expires shall be extinguished.
③Annual leave allowance shall not be paid for annual leave saved pursuant to paragraph ⑴ and annual leave that has been extinguished pursuant to paragraph ②.
④In addition to the matters stipulated in Paragraphs 1 through 3, necessary matters concerning the procedure for saving and using annual leave, etc. shall be determined by the company president.
Article 22(Guarantee of Use of Annual Leave for More Than 10 Consecutive Days)
①When an employee applies for annual leave for 10 or more consecutive days 3 months in advance for sufficient rest, family harmony, or self-development, etc. by using the annual leave saved as annual leave under Article 21, it shall be approved if there is no special impediment to the performance of the duties. In this case, the Corporation shall make the necessary efforts to ensure smooth operation and free use of annual leave, such as designation of a business agent for his/her work during the use of annual leave, and replenishment of manpower.
②In addition to the matters stipulated in Paragraph 1, the president shall determine the necessary matters regarding the application procedure for the use of annual leave for more than 10 consecutive days.

V. Conclusion

It is necessary to recognize that guaranteeing long-term leave is a more desirable welfare for workers than monetary compensation. In addition, the guarantee of long-term leave is virtually impossible unless it is systematically implemented through the company's collective leave policy or the introduction of the employer's obligation to guarantee through the employment rules. Therefore, it is very much required to introduce a long-term leave guarantee policy along with the introduction of a vacation saving account system for working hours and annual paid leave.