Labor Law Consultation

11.08.2022

COMPENSATION FOR UNUSED PAID ANNUAL LEAVE UPON TERMINATION OF EMPLOYMENT

My employment is about to be terminated, but I have leave that I haven't used yet. Is there an obligation for the employer to pay me the days of paid annual leave that I have not taken, or can I transfer them to my next employer?

According to Art. 224, para. 1 of the Labor Code (LC), upon termination of the employment relationship, the worker or employee has the right to monetary compensation for the unused paid annual leave, the right to which has not been extinguished by statute of limitations. The compensation under the mentioned paragraph is calculated according to the order of Art. 177 LC as of the day of termination of the employment relationship (art. 224, paragraph 2 LC).

There is no legal basis in the law for transferring unused paid annual leave from one employer to another.

According to the provision of Art. 123, para. 1 LC, the employment relationship with the worker or the employee is not terminated upon a change of employer as a result of:

  1. merger of enterprises;
  2. merger of one enterprise into another;
  3. distribution of the activity of one enterprise between two or more enterprises;
  4. transfer of a separate part from one enterprise to another;
  5. change of the legal organizational form of the enterprise;
  6. change of the owner of the enterprise or a separate part of it;
  7. assignment or transfer of activity from one enterprise to another, including transfer of material assets.

In the cases under Art. 123, para. 1 of the LC, the rights and obligations of the transferring employer prior to the change, which arise from the employment relationship as of the date of the change, are transferred to the new acquiring employer (Article 123, paragraph 2 of the LC). This means that upon changing the employer in accordance with Art. 123 of the LC, there is no basis for payment of compensation under Art. 224, para. 1 LC.

According to Art. 42, para. 2 of the Ordinance on working hours, rest and leaves (OWHRL), compensation for unused paid annual leave under Art. 224 of the LC is also paid in cases where, on the date of termination of the employment relationship, the worker and the employee do not have an acquired right to leave. Workers and employees are entitled to cash compensation for unused paid annual leave when they have acquired at least 1 full month of work experience. The last month of work experience of more than 1 month is considered complete if the worker and the employee have served at least half of the working days of the month - Art. 42, para. 3 OWHRL. The amount of compensation for unused paid annual leave under Art. 224, para. 1 of the Labor Code is determined in proportion to the time that is recognized as work experience in the enterprise on the day of termination of the employment relationship (Art. 42, Para. 4 OWHRL).

Cash compensation is due for paid leave that has not been used and has not lapsed

According to Art. 176, para. 1 LC, the use of paid annual leave can be postponed to the next calendar year by:

  1. the employer - due to important production reasons under the condition of Art. 173, para. 5, sentence three of the LC;
  2. the worker or the employee - when he uses another type of leave or at his request with the consent of the employer.

When the leave is postponed or not used until the end of the calendar year to which it refers, the employer is obliged to ensure its use in the following calendar year, but no later than 6 months, counting from the end of the calendar year to which it refers applies (art. 176, para. 2 LC). When the employer has not authorized the use of leave in the cases and within the terms under Art. 176, para. 2 of the LC, the worker or employee has the right to determine the time of its use by notifying the employer in writing at least 14 days in advance (Art. 176, paragraph 3 of the LC).

Regarding Art. 176a, para. 1 LC, when the paid annual leave or part of it is not used until the expiration of two years from the end of the year for which it is due, regardless of the reasons for this, the right to use it is extinguished by statute of limitations. When the paid annual leave is postponed under the conditions and according to the order of Art. 176, para. 1 LC, the worker's or employee's right to use it is extinguished by statute of limitations after the expiration of two years from the end of the year in which the reason for not using it ceased to exist (art. 176a, para. 2 LC).

In the event that the prerequisites for liability on the part of the employer of the compensation under Art. 224, para. 1 of the LC, it is paid regardless of the type of reason for terminating the employment contract.

For the duration of the paid annual leave, the employer pays the worker or employee remuneration, which is calculated from the average daily gross labor remuneration charged at the same employer for the last calendar month preceding the use of the leave, during which the worker or employee worked at least 10 working days - Art. 177, para. 1 LC. When there is no month in which the worker or employee has worked at least 10 working days for the same employer, the remuneration under para. 1 is determined by the basic and additional wages of a permanent nature agreed in the employment contract (art. 177, para. 2 LC.)

In Art. 17, para. 1 of the Ordinance on the structure and organization of the salary (OSOS) provides that in the gross remuneration for determining the remuneration for paid annual leave under Art. 177 or the benefits under Art. 228 of the Labor Code, include:

  1. the basic salary for the time worked;
  2. the remuneration above the basic salary, determined according to the applied labor payment systems;
  3. the additional labor remunerations determined by the ordinance, by another normative act, by a collective or individual labor contract or by an internal act of the employer, which are of a permanent nature;
  4. the additional labor remuneration in case of internal replacement under Art. 259 of the Labor Code;
  5. the remuneration in accordance with Art. 266, para. 1 of the Labor Code;
  6. the remuneration paid during downtime or due to production necessity, under Art. 267, para. 1 and 3 of the Labor Code;
  7. the remuneration pursuant to Art. 268, para. 2 and 3 of the Labor Code.

In the gross remuneration for determining the remuneration for paid annual leave under Art. 177 of the Labor Code, the corresponding proportional part of the additional periodic or annual remunerations paid after the use of paid leave is included, and for this purpose the paid remunerations for paid leave are recalculated (Article 17, Paragraph 2 OSOS).

According to Art. 18. para. 1 OSOS, the average daily gross labor remuneration under Art. 177, para. 1 of the Labor Code is established by dividing the gross remuneration charged at the same employer for the last calendar month preceding the use of leave, during which the worker or employee worked at least 10 days, by the number of days worked in that month. The average daily gross remuneration under Art. 177, para. 2 of the Labor Code is established by dividing the basic and additional wages of a permanent nature agreed in the employment contract by the average monthly number of working days during the relevant calendar year. At a certain monthly amount of the labor remuneration established under Art. 18. para. 1 OSOS, sentence one, the average daily gross remuneration is adjusted by a coefficient obtained from the ratio of the number of working days of the month, accepted as a base, and the number of working days of the corresponding month, during which the leave is used (Art. 18. para. 2 OSOS). In the case of a cumulative calculation of working hours, the number of days worked is determined by dividing the hours worked in the month after the conversion of night hours into daytime hours by the daily duration of working hours established for the workplace in the case of daily reporting of working hours (Art. 18. para 3 OSOS).

In Art. 22, para. 1 of the LC, it is established that the gross remuneration for determining the benefits under this section (including the compensation under Art. 224 of the LC) is the gross remuneration received by the worker or employee for the month preceding the month in which the reason arose for the corresponding compensation, or the last monthly gross remuneration received by the worker or employee, unless otherwise provided.