[Q&A] Can Holiday Overtime Be Exchanged for Leave?
2025. 5. 23
Question: If an employee works overtime on a statutory holiday, is it legal for the company to arrange a compensatory day off or substitute leave in lieu of overtime pay?
Answer: While there is no direct legal basis for this method, in practice, if both the employer and the employee agree and no disputes arise, it may be considered operationally feasible.
Article 44 of the Labor Law of the People's Republic of China stipulates: "Under any of the following circumstances, the employer shall pay wages to the worker at a rate no less than the following standards:
(1) If the worker’s working hours are extended, no less than 150% of the normal wage;
(2) If the worker is arranged to work on a rest day and no substitute leave can be arranged, no less than 200% of the normal wage;
(3) If the worker is arranged to work on a statutory holiday, no less than 300% of the normal wage."
However, while the third clause explicitly requires employers to pay corresponding overtime wages for work performed on statutory holidays, it does not specify whether employers may arrange compensatory or substitute leave instead.
Article 40 of the Labor Law states that employers must, in accordance with the law, arrange leave for workers during the following holidays:
(1) New Year’s Day,
(2) Spring Festival,
(3) International Labor Day,
(4) National Day,
(5) Other holidays stipulated by laws and regulations.
Generally, statutory holidays hold special significance, granting workers the right to rest, and their nature differs from ordinary rest days, making substitution impermissible.
Therefore, if an employee works overtime on a statutory holiday, there is no direct legal basis for the company to arrange compensatory or substitute leave in lieu of overtime pay.
However, in practice, some companies do arrange compensatory or substitute leave for employees who work on statutory holidays. For example, when overtime pay is required for work on statutory holidays, the standard rate is 300%. Some companies calculate compensatory leave based on triple the usual days, provided the employee agrees and voluntarily requests such leave. If both parties reach mutual agreement and no disputes arise, such arrangements may be feasible.
If the company unilaterally imposes compensatory or substitute leave without employee consent, the employee may first negotiate with the company to demand statutory overtime pay in accordance with the law. If negotiations fail, the employee may apply for mediation through labor dispute resolution bodies. If mediation is unsuccessful, legal rights may be pursued through labor inspection or arbitration in accordance with the law.