Equivalent for unused vacation leave at the turn of the year

The equivalent for unused vacation leave is the equivalent of unused vacation leave in the form of a cash compensation that the employee is entitled to receive. The cash equivalent applies to both the unused holiday leave for the current year and the overdue leave. So how to determine the amount of the cash equivalent for unused leave, when the employer has to pay the outstanding and current leave?

When is the equivalent for unused annual leave entitlement?

The employee may receive an equivalent for unused vacation leave if it is caused by the expiry of the employment contract or its termination, and the parties do not plan to sign another employment relationship. During the term of the employment contract, the leave must be used or carried over to the next year, it is not possible to pay the equivalent during the employment relationship. The right to a cash equivalent for unused leave is regulated in the Labor Code. The right in question is the basis for settling the amounts due that the employee has guaranteed due to the employment relationship between him and the employer. It is the equivalent of unused vacation leave in the form of a monetary compensation that the employee is entitled to receive.

Calculation of the equivalent for leave at the turn of the year

The equivalent for unused annual leave is calculated using a coefficient which is a constant value for a given calendar year. The method of calculating the coefficient for calculating the equivalent is regulated by the provision of § 19 of the Regulation of the Minister of Labor and Social Policy on detailed rules for granting holiday leave, determining and paying remuneration for the holiday and cash equivalent for the holiday.

When calculating the amount of the allowance, the coefficient applicable in the year of the payment of the allowance is applied, even if it is the leave transferred from the previous year. The employee acquires the right to the equivalent on the date of expiry or termination of the employment contract and the indicator for the year in which he acquired this right is used. The equivalent for unused annual leave should be paid on the date of termination of the employment contract. The date of his payment should be the last day of employment. On this day, the employee acquires the right to an equivalent instead of the right to leave. The year in which the entitlement to annual leave inequalities becomes relevant is relevant, and it is from that year that the equivalent factor should be applied.

Example 1.

The employment contract will be terminated with the employee at the end of January. The employer will be required to pay the equivalent for 5 days of annual leave (2 days for 2020 and 3 days for 2021). The employee was employed full-time with a gross salary of PLN 3,200.

When determining the equivalent for annual leave in 2021, the coefficient applicable in 2021 should be adopted, i.e. 21.00.

Calculation of the equivalent for one day:

PLN 3200: PLN 21.00 = PLN 152.38

Calculation of the equivalent for 1 hour:

PLN 152.38: 8 = PLN 19.05

Calculation of the equivalent for 5 days of unused vacation - 40 hours

PLN 19.05x 40 = PLN 762

The employee should be paid an equivalent of PLN 762 for 5 days of unused vacation.