Why is it so hard to get everyone to take five days of paid leave a year? The company's obligation and the two-year time limit

In short: For workers who are granted 10 or more days of annual paid leave, the employer is obliged to have them take five days a year by designating the timing (Labor Standards Act, Article 39, paragraph 7; in force since April 2019). Failing to have them take it is subject to a fine of up to 300,000 yen (Article 120). In practice, however, "making every employee take five days a year is unexpectedly hard" is the honest reality. Behind it lies workers' psychology: they want to keep leave in reserve "just in case," and feel uneasy about using it up early. And the right to annual paid leave is extinguished by prescription after two years (Article 115). So that the right is not lost, the company needs a structure, and both sides need a change of mindset. This page explains the substance of the obligation, why it is hard to get leave taken, and what a company can do.

We receive many consultations along the lines of: "They have paid leave but will not take it," and "Before we knew it, unused leave had piled up." This page is for the owners and general-affairs staff of small and medium-sized companies. We set out the exact substance of the five-days-a-year obligation, why it is hard to enforce, what is lost by prescription, and what a company should put in place. Judging an individual labor dispute is outside the scope of this article.

Who, from when, and what is the five-days-a-year obligation?

Annual paid leave is granted, in principle, as 10 days to a worker who has been employed continuously for six months and whose attendance rate during that period was 80% or more (Labor Standards Act, Article 39, paragraph 1). The number then increases with years of service, up to a maximum of 20 days.

Of these, for a worker who is granted 10 or more days a year, the employer is obliged to have the worker take five days each year by designating the timing (Labor Standards Act, Article 39, paragraph 7). Leave that the worker takes at his or her own request counts toward these five days, but for the part that does not reach five days, the company must have the worker take it even by designating the timing.

The obligation has applied since April 1, 2019. If the worker is not made to take the leave, this is subject to a fine of up to 300,000 yen under Article 120. "The worker will not take time off" is not an excuse.

Why is making everyone take five days a year unexpectedly hard?

Even though the rule is simple, in practice making every employee take five days a year is unexpectedly hard. The fact that, in many workplaces, the personnel staff are constantly sending notice of the leave-taking situation both to everyone as a whole and to the individual concerned is the flip side of that difficulty.

What lies behind it is the psychology of workers. Paid leave is something they want to use "just in case." They want to keep it in reserve for illness, family matters, or sudden circumstances, and it is said that there is an uneasiness that if they use it up early, they will have nothing to use in an emergency.

Yet this "reserving" in fact endangers the right, because the right to annual paid leave is extinguished by prescription after two years. Leave that has been piled up can lose the right itself before "just in case" ever arrives. This is where a change of mindset — from "paid leave is something to save up" to "paid leave is something you use so as not to lose the right" — becomes necessary.

What is lost if you leave it alone?

The right to claim annual paid leave is extinguished by prescription two years after the day it is granted (Labor Standards Act, Article 115). Even though it can be carried over to the next year, the two-year limit does not move, including the carried-over portion. Leave that has passed two years without being used can no longer be taken.

This raises the question: "Then can the company buy back the unused leave?" — but the company is in principle not allowed to buy back statutory annual paid leave for money. The purpose of annual paid leave is to let the worker "rest and recover," and allowing buy-back would run counter to the purpose of encouraging leave to be taken. By way of exception, the portion that has been extinguished by prescription, or unused leave at the time of retirement, is said to be acceptable to buy back within a certain range.

In other words, unused paid leave basically "disappears without being rested." That is exactly why a structure is needed for taking leave before it disappears.

How does a company turn a "change of mindset" into a structure?

Simply saying "please take it" will not change the psychology of reserving leave. An environment in which leave is easy to take needs to be built as a structure.

What to do	What it means
Make the take-up visible	Regularly grasp, and notify, who has how many days left, both as a whole and for each individual
Planned annual leave	Allocate the days to be taken on a planned basis under a labour-management agreement (a way to use up the employer-designated portion of the five days on a planned basis)
Operating the designation of timing	For people whose take-up is low, the company designates the timing and encourages them to take leave
Creating an atmosphere where leave is easy to take	Put in place a structure where "work keeps moving even when someone is off" (handover, spreading out responsibilities) and lower the psychological hurdle

The important thing is to present the notices and the designation of timing not as "nagging" but as "a structure that protects the right." Continually explaining that paid leave disappears after two years, and that taking it early and on a planned basis is in the worker's own interest — this is the entry point to a change of mindset.

Whom should you ask, for what?

What you want done	Whose work it is
Putting the work rules and the annual-paid-leave rules in order, concluding the labour-management agreement for planned annual leave, and building the structure for managing and notifying the take-up	A Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant) (this office)
Disputes over paid leave, claims for the unused portion, and disputes connected with dismissal or retirement	An attorney
Payroll, withholding, and the year-end adjustment that accompany taking paid leave	A Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant) (this office) / a tax accountant

Managing annual paid leave, planned annual leave, and putting the work rules in order are the work of a Shakai Hoken Roumushi. This office helps you build, as a structure, not only "complying with the obligation" but also "a workplace where leave is easy to take." A matter that has already become a dispute is the domain of an attorney.

What can 四葉社会保険労務士事務所 do for you?

四葉社会保険労務士事務所 in Kohinata, Bunkyo Ward, handles putting the annual-paid-leave rules and work rules in order, the labour-management agreement for planned annual leave, building a take-up management table and a notification structure, and organizing the division of work so that leave is easy to take. The initial consultation is free. Fees are set out in the fee schedule.

Please note that where a claim for the unused portion or a dispute has already arisen, we will guide you to engage an attorney directly. This office does not accept referral fees.

Frequently asked questions

Q. If we do not have workers take the five days, does the penalty apply immediately?
A. Failing to have the leave taken is subject to a fine of up to 300,000 yen under Article 120. In practice it often goes through the guidance of the Inspection Office first, but that does not mean you may leave the violation as it is. First grasp the take-up situation and correct it, including by designating the timing.

Q. Can the company buy back paid leave that was not used?
A. In principle, no. Buying back statutory annual paid leave for money runs counter to the purpose of a system that encourages leave to be taken. By way of exception, the portion extinguished by prescription, or unused leave at retirement, is said to be acceptable to buy back within a certain range. Proceed after sorting this out in the work rules and the like.

Q. What is the time limit on annual paid leave?
A. Two years (Labor Standards Act, Article 115). The portion that has passed two years from the day it was granted is extinguished by prescription and can no longer be taken. You need to manage it on a two-year limit, including the carried-over portion.

Q. If an employee says "I don't need to take paid leave," is designation of the timing still necessary?
A. The obligation to have five days taken is an obligation on the employer's side. Even if the worker does not wish to take it, for the part that does not reach five days the company must have the worker take it by designating the timing. It is realistic to proceed on a planned basis through the framework of planned annual leave.

Sources for this article

• Labor Standards Act (労働基準法, Act No. 49 of 1947), Article 39, paragraph 1 and paragraph 7 (annual paid leave and the obligation to have five days taken by designating the timing), Article 120 (fine of up to 300,000 yen), and Article 115 (two-year prescription of the right to claim)
• The five-days-a-year obligation came into force on April 1, 2019 (amended Labor Standards Act; confirmed from materials published by the Ministry of Health, Labour and Welfare and prefectural labour bureaus)
• The statement that buying back annual paid leave is in principle not allowed, while the portion extinguished by prescription and unused leave at retirement may be bought back within a certain range, is a general statement based on administrative interpretation
• The article numbers, the prescription period, and the penalty have been checked against materials published by the Ministry of Health, Labour and Welfare and prefectural labour bureaus (as of August 2026)

This article does not go so far as to decide whom you should consult. Putting the annual-paid-leave rules and work rules in order, concluding the labour-management agreement for planned annual leave, and building the structure for managing and notifying the take-up are the work of a Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant). Claims for the unused portion and disputes over paid leave are the work of an attorney. As for payroll, withholding, and the year-end adjustment that accompany taking paid leave, payroll is the work of a Shakai Hoken Roumushi and the tax side is the work of a tax accountant. This office does not accept referral fees. The cost of consulting 四葉社会保険労務士事務所 is set out in the fee schedule, and the questions we are asked most often are collected on the FAQ page.

This article is general information. Judgments that fit your particular circumstances are made by a qualified professional after a meeting. Written by Joji Uramatsu (Shakai Hoken Roumushi (Certified Social Insurance and Labor Consultant), Gyoseishoshi (Certified Administrative Procedures Legal Specialist), Registered Real Estate Transaction Specialist).