In Japan, paid annual leave — yūkyū kyūka (有給休暇) — is one of the most undertaken statutory entitlements in the developed world. Japanese employees use roughly half of the days they are legally owed, which is why the government overhauled the rules in 2019. Since then, employers have a hard legal obligation: every eligible employee must take at least five days of annual leave each year, or the employer pays the price.

This guide explains how the entitlement works under the Labor Standards Act (Rōdō Kijun Hō), who qualifies, how leave grows with length of service, what the mandatory five-day rule actually requires, and the compliance pitfalls that catch foreign-owned employers most often.

Key Takeaways

The minimum entitlement is 10 days of paid annual leave after 6 months of continuous service with at least 80% attendance.
Entitlement increases with tenure to a maximum of 20 days at 6.5 years and beyond.
Since the 2019 Work Style Reform, employers must ensure each eligible employee actually takes at least 5 days of annual leave per year.
Failure to ensure the five-day minimum carries fines of up to ¥300,000 per employee.
Unused leave can be carried over for two years; on termination, all unused balance must be paid out.

The Statutory Entitlement Under Article 39

Article 39 of the Labor Standards Act sets the minimum paid annual leave (nenji yūkyū kyūka) for every employee in Japan. Unlike many other countries, the entitlement does not start on day one — it crystallises after six months of service, then grows year by year.

How the Entitlement Grows

Annual leave starts at 10 days once an employee has completed six months of continuous service and met the 80% attendance test. From there, it increases on each subsequent service anniversary:

Length of continuous service	Annual leave entitlement
6 months	10 days
1.5 years	11 days
2.5 years	12 days
3.5 years	14 days
4.5 years	16 days
5.5 years	18 days
6.5 years and beyond	20 days

The entitlement is paid at the employee’s average wage. Employers cannot pay a reduced rate during annual leave or substitute it with a non-cash benefit.

Why the 80% Attendance Rule Matters

Eligibility for paid annual leave is conditional on the employee having attended at least 80% of working days during the relevant qualifying period. An employee who falls below the 80% threshold in a given year is not entitled to receive new annual leave for the following year — although any previously accrued, unexpired leave remains available.

This catches employers off guard during long absences for non-statutory reasons. Periods such as authorised maternity leave, childcare leave, family-care leave, and absences due to work-related injury are treated as attended days for the purpose of this calculation, but unauthorised absence is not.

Eligibility: Who Qualifies for Yūkyū Kyūka

Any employee — full-time, part-time, fixed-term, or dispatched (haken) — qualifies once they meet two conditions:

Six months of continuous service with the same employer.
At least 80% attendance during that qualifying period.

Part-time employees who work fewer than the standard number of days per week receive a pro-rated entitlement based on their working hours and scheduled days. The pro-rata calculation is set out in the Ordinance for Enforcement of the Labor Standards Act and increases with both years of service and weekly working days.

If you operate in multiple countries, the eligibility rules in Japan sit at the stricter end of the APAC range. For comparison, see our breakdown of annual leave entitlements in Australia and annual leave in New Zealand, where leave begins accruing from day one rather than after a qualifying period.

The Mandatory Five-Day Rule

The 2019 Work Style Reform (Hatarakikata Kaikaku) added Article 39-5 to the Labor Standards Act and changed the legal posture of annual leave in Japan. Before 2019, the entitlement existed but was widely unused. Now, the employer — not just the employee — is responsible for ensuring leave is taken.

What the Rule Requires

For every employee entitled to 10 or more days of annual leave in a given year, the employer must ensure that at least 5 days are actually taken within 12 months of the entitlement arising. Two compliance pathways are recognised:

The employee voluntarily applies for and takes 5 or more days.
The employer designates specific dates as paid leave, after consultation with the employee.

In practice, most companies operate a hybrid: they monitor leave usage during the year and only designate dates if an employee is on track to fall short.

The Penalty for Non-Compliance

Employers who fail to ensure the five-day minimum face fines of up to ¥300,000 per non-compliant employee. The fine is per employee, per year — so a company with twenty employees who each miss the threshold faces ¥6,000,000 in exposure for a single year of non-compliance.

The Ministry of Health, Labour and Welfare also requires employers to maintain an annual leave management ledger (nenji yūkyū kyūka kanri bo) recording the date of leave entitlement, the days taken, and the dates designated by the employer. Records must be kept for 5 years (with a current transitional rule of 3 years).

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Employer Obligations Beyond the Five-Day Rule

The five-day rule is the headline compliance issue, but it is not the only obligation. Article 39 imposes a fuller set of duties.

Granting and Paying Leave Correctly

Employers must:

Grant the statutory minimum (10–20 days) based on service and attendance.
Pay the employee’s average wage during annual leave.
Maintain accurate records of accruals, designations, and days taken.
Pay out any unused balance on termination of employment.

The Right to Choose Timing — and Its Limits

Employees have the right to choose when they take annual leave under Article 39(5). The employer can shift the requested date — known as jiki henkō ken (the right to change the date) — only if granting leave on the requested day would seriously interfere with normal business operations. Refusing leave outright is not a permitted option; only postponement is, and even then the bar is high.

A pattern of denying or repeatedly shifting leave requests is also a compliance risk under Article 39-5, because employers must not discourage employees from taking leave.

Carry-Over and Expiry

Unused annual leave can be carried forward for up to two years from the date of entitlement. After the two-year window, the leave expires under Article 115 (the general statute of limitations on wage-related claims). Employers cannot extend this period unilaterally to disadvantage employees, but more generous carry-over policies are permitted.

Termination Payouts

When employment ends, all unused annual leave must be paid out at the employee’s average wage. This obligation applies regardless of how the employment ends — resignation, dismissal, or end of a fixed-term contract. There is no statutory right to cash out leave during employment; payout is reserved for the termination scenario.

Common Pitfalls for Employers in Japan

The combination of strict timing rules, a designation requirement, and per-employee fines creates a few recurring failure modes — particularly for foreign-owned employers used to looser frameworks.

1. Treating the Five-Day Rule as the Employee’s Problem

The five-day rule is an employer obligation, not an employee one. If an employee chooses not to take leave, the employer must designate dates. Companies that put the burden entirely on individual employees (for example, by assuming a leave portal counts as compliance) routinely fail Labor Standards Inspection Office audits.

2. Ignoring the 80% Attendance Calculation

Some payroll systems and HRIS platforms imported from other markets do not model the 80% attendance test correctly. An employee whose attendance dipped below 80% in the qualifying period should not receive a new annual leave grant the following year — but they retain any unexpired prior balance. Mishandling this is a common source of overpayment and dispute.

3. Not Paying Out Unused Leave on Termination

Termination payout is statutory, not discretionary. Some employers — particularly where the employee resigns suddenly or in disputed circumstances — wrongly attempt to forfeit the balance. Forfeiture clauses in contracts cannot override Article 39.

4. Failing to Keep the Leave Management Ledger

The ledger requirement is widely missed by smaller employers. If an inspector requests it and the employer cannot produce a ledger showing the entitlement date, days taken, and designated dates per employee, the burden shifts to the employer to disprove non-compliance.

5. Misclassifying Part-Time Workers

Part-time employees in Japan are entitled to pro-rated annual leave, not zero leave. The pro-rata formula depends on weekly contracted days and length of service. Treating part-time workers as ineligible is one of the most common — and most expensive — errors uncovered during compliance reviews.

For payroll teams managing leave across multiple countries, see our guidance on tracking accrued leave correctly and how to set up leave policies for distributed teams that respect local statutory floors.

Frequently Asked Questions

What happens if an employee does not take the mandatory five days?

The employer must designate specific days as paid annual leave, after consultation with the employee, to ensure the five-day minimum is met within the 12-month entitlement period. Failing to do so exposes the employer to fines of up to ¥300,000 per affected employee.

Can annual leave be paid out instead of taken?

Not during employment. Article 39 requires that paid annual leave actually be taken as time off — buying it out for cash defeats the rest-and-recovery purpose of the entitlement. On termination, however, any unused balance must be paid out at the employee’s average wage. Some companies offer payout of unused leave that exceeds the statutory minimum, but this is a contractual extra rather than a statutory right.

Are part-time employees entitled to annual leave?

Yes. Part-time employees who meet the six-month service and 80% attendance conditions are entitled to pro-rated annual leave based on their contracted weekly working days and length of service. The pro-rata schedule is fixed by the Ordinance for Enforcement of the Labor Standards Act.

Does annual leave carry over to the next year?

Yes. Unused annual leave can be carried over for up to two years from the date of entitlement, after which it expires under the general statute of limitations on wage claims.

Do public holidays count as annual leave?

No. Japan’s national holidays are separate from annual leave. An employee who is not required to work on a national holiday does not use annual leave for that day. Whether national holidays are paid depends on the employer’s working rules (shūgyō kisoku), not on Article 39.

How Leave Balance Helps

Tracking 10–20 day entitlements across length of service, monitoring the 80% attendance threshold, designating dates to satisfy the five-day rule, and maintaining the leave management ledger is real operational work — particularly for foreign-owned employers running on payroll systems built for other jurisdictions.

Leave Balance handles the entire workflow. You can configure Japan-specific accrual schedules, the 80% attendance test, the two-year carry-over window, and the five-day designation process per employee. Approvals run through Slack or Microsoft Teams where your team already works, and the audit log doubles as your annual leave management ledger. Pricing is a flat USD $10/month — not per employee — so the cost stays the same whether your Tokyo office has 5 people or 500.