The best compromise IMO (and which is what is practiced in my company), the 5 days leave will be changed to 3 days leave + 2 days MC, and 2 days leave 'refunded' to the employee to re-apply in the future. This is documented in my company HR guidebook thing.

For your case, it is grey area because you don't have any policies around this which specifically state what your employee is or isn't alllowed to do.