Annual leave and statutory holidays are two separate entitlements with two different qualifying tests. Most of the disputes small employers run into come from treating them as one thing.
🏖️ Paid annual leave — the 7-to-14 scale
An employee earns paid annual leave after 12 months under a continuous contract. The number of days then climbs with length of service:
| Years of service | Paid annual leave |
|---|---|
| 1st and 2nd year | 7 days |
| 3rd year | 8 days |
| 4th year | 9 days |
| 5th year | 10 days |
| 6th year | 11 days |
| 7th year | 12 days |
| 8th year | 13 days |
| 9th year or more | 14 days |
💡 Payment in lieu has a hard floor. An employee may accept payment instead of leave only for the part of the entitlement that exceeds 10 days. Someone entitled to 12 days can take 10 and be paid for 2 — you cannot buy out the first 10.
📅 Statutory holidays are a different test
Every employee gets Hong Kong's statutory holidays regardless of length of service. But to be paid for one, they must have been employed under a continuous contract for at least 3 months immediately before the holiday. Otherwise the day is a day off, unpaid.
💡 Two different lists. "Statutory holidays" (the Employment Ordinance entitlement) and "general holidays" (the gazetted public holidays the banks observe) are not identical. Many contracts voluntarily promise the longer general-holiday list — check which one yours actually says before you count.
Planning around the calendar? See Hong Kong public holidays 2026 and working days for the full list.
🧮 The calculation everyone gets wrong
Annual leave pay and statutory holiday pay are both based on the employee's average daily wages over the preceding 12 months — not monthly salary ÷ 30.
That distinction matters most for anyone whose pay is not a flat number. Commission, allowances and overtime paid during those 12 months feed into the average, so a salesperson's leave day is often worth more than their basic salary suggests.
Example: if average daily wages over the last 12 months work out to HK$800, then one day of annual leave — or one paid statutory holiday — is worth HK$800.
⚠️ Certain days are excluded from the 12-month average — periods where the employee was not paid full wages, such as unpaid leave. Leave the edge cases to the Labour Department's own calculator rather than guessing.
🗓️ When leave pay has to reach them
Annual leave pay is due no later than the normal pay day after the leave is taken. It is not something to settle at year end.
Tracking this in a spreadsheet?
Leave balances, the 3-month test, twelve months of wages for the average — none of it is hard, all of it is fiddly, and it goes wrong quietly. It is the shape of work that should run itself. See which admin tasks are worth automating first.