Korea's Annual Leave Use Promotion Procedure: How to Avoid Paying Out Unused Leave

Unused annual leave is a wage claim. That is the rule covered in our companion post on annual leave accrual and compensation. But the Labor Standards Act (LSA) gives employers one statutory way out. Article 61 sets up a "leave use promotion" procedure. Run it correctly, and the obligation to pay for unused leave disappears.

This post explains how the procedure works, what the required notices look like, and where employers most often lose the exemption in practice.

The Legal Effect: An Exemption, Not a Default Rule

Under Article 60, Paragraph 7, unused leave lapses after one year. Ordinarily, lapse converts into a monetary claim for unused leave allowance, paid at the applicable ordinary or average wage.

Article 61 creates an exception. If the employer completes the prescribed two-step notice procedure and the employee still does not use the leave, the employer owes nothing for the unused days. The leave simply expires without company needing to provide a compensation.

Courts treat this as a narrow exemption from an employee protection, so they apply it strictly. The following two procedure should be followed for a lawful exemption.

The Two-Step Procedure for Employees With One Year or More of Service

Assume a company manages leave on a calendar-year basis, from January 1 to December 31.

Step one, the first notice. Between July 1 and July 10, six months before the year-end expiry, the employer must notify each employee in writing of their unused leave balance and ask them to specify when they will use it.

The employee's response window. The employee has 10 days from receipt of the first notice to submit a leave plan specifying dates.

Step two, the second notice. If the employee does not respond within that 10-day window, or only submits a plan for part of the balance, the employer must issue a second written notice by October 31, two months before expiry, unilaterally designating dates for the remaining unused leave.

Notice takes effect only on receipt, not on dispatch. A letter mailed on October 28 that arrives on November 1 misses the deadline, even though it was sent in time.

The Separate Timeline for Employees Under One Year of Service

First-year monthly leave under Article 60(2) follows its own schedule, split into two stages because the 11 days accrue gradually rather than all at once.

For the first 9 days (typically covering months one through nine of service), the employer issues its first notice 3 months before the one-year mark, with a 10-day response window, then a second notice one month before the one-year mark if needed.

For the remaining 2 days (typically covering months ten and eleven), the employer issues its first notice one month before the one-year mark, with the same 10-day window, then a second notice 10 days before the one-year mark if needed.

Because these dates run from each employee's individual hire date rather than a fiscal year, first-year leave promotion cannot be batched into a single company-wide mailing the way second-year and later leave often is.

The Step Employers Most Often Skip: Refusing to Accept Work on the Designated Day

Completing both notices is necessary but not sufficient. If an employee shows up for work on a day the employer designated as leave, and the employer accepts that work without objection, courts treat the leave as effectively not granted. The employer must clearly communicate that it will not accept work that day and must not assign tasks for it.

Leave the Procedure Cannot Reach

Some leave falls outside the promotion procedure entirely. Leave that went unused because of industrial accident leave, maternity leave, parental leave, or family care leave is generally treated as non-usable for reasons attributable to the employer or to statutorily protected absence, and is not subject to forfeiture through this mechanism. Employers should not include these days in a promotion notice as if they were ordinary unused leave.

Compliance Checklist

• Track first-year and second-year-plus employees on separate promotion calendars.
• Send every notice in writing to each employee individually. Bulletin board postings and group emails do not satisfy the requirement.
• Confirm receipt dates, not dispatch dates, against each statutory deadline.
• For employees who respond only partially, issue the second notice covering the remainder.
• Prepare and deliver a written refusal-of-work notice for each designated leave date, and do not assign work for that day.
• Exclude leave affected by industrial accident, maternity, parental, or family care leave from the promotion process.
• Retain all notices and delivery confirmations for at least three years, matching the wage claim limitation period.

Final Thoughts

The promotion procedure rewards precision, not effort. A company that sends thoughtful reminders but misses a deadline by a few days, or fails to formally refuse work on a designated date, gets no credit for the attempt. For foreign-invested companies used to more flexible leave administration elsewhere, this rigidity is often the first real surprise in Korean labor compliance.

If you would like further advice on leave promotion notices, feel free to contact me at sjchun@seoulcounsel.com.

This article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For advice on a specific situation, please consult a qualified Korean attorney.

© 2026 SJ Chun. All rights reserved. This article may not be reproduced, copied, or republished, in whole or in part, without prior written permission from the author.