Do the employer have to pay, defer or cancel unused vacation entitlements?
In all companies, each year the question arises of how to manage paid leave not taken by the employee at the end of the period. This subject is often the source of tension between the employee and his manager or even the human resources department. This practical guide explains how best to manage this situation.
What the law says about unused vacation days
When it comes to taking time off, it is important to refer to what the law says. Paid vacations must be taken during a reference period which is generally fixed on the calendar year. This means that any days not taken during this reference period are in theory lost. This applies to absences of both full-time and part-time employees. However, there are exceptions to protect the employee’s rights. The law can vary depending on the country but below are generic rules applicable in a lot of countries.
In case of maternity leave or adoption leave, the mother-to-be may be prevented from taking her paid leave if she goes on maternity leave while her paid leave counters are not at zero. Her days are then automatically carried forward to be taken upon her return.
When an employee is on sick leave due to an occupational disease or an accident at work, he/she retains his/her leave entitlements so that he/she can take them upon his/her return to the company.
The employer did not allow the employee to take his leave
Sometimes, the company is facing an increase in activity. It may also be short of manpower. This results in a situation where the employee is not able to take all of his leave. Since this situation is linked to the employer, the employee benefits from the transfer of his days to the next period.
The employee leaves the company
Whether it is due to a dismissal, a resignation or the end of an employment contract (fixed-term contract), the unused vacation days must be compensated when the employee leaves the company. The law protects the employee’s rights at this level. The employee does not lose his days in case of termination of his employment contract. On the contrary, the company will pay the employee an indemnity in lieu of paid leave in the employee’s account balance or allow the employee to take the remaining days (for example during the notice period). This rule is true regardless of the type of dismissal : dismissal for serious misconduct or economic reasons.
Derogation by collective agreement
Certain branch agreements (collective agreement) or company agreements on the organization of work allow employees to benefit from the carry-over of untaken leave. There is generally a limit to the number of days that can be carried over and the time period within which they must be taken after this carry-over.
Clearly, the law protects the employee who must be able to go on vacation on a regular basis. The employer is obliged to make the necessary arrangements to allow these vacations to be taken. In some companies, the dates of vacations are decided unilaterally by the employer.
When does the employee lose his unused days?
Whether we work in worked days or in working days, the employee loses his untaken CP days when he arrives at the end of the year with a counter of rights higher than 0 and :
- the employer has regularly allowed him to take vacations,
- he has not been prevented from taking vacation due to illness or maternity leave,
- no company agreement allows him to obtain the deferral.
So the loss is really related to poor planning by the employee. If the employee has made regular requests for leave and these have not been accepted by the employer within the time limit, the employee will be able to claim the deferral of his unused days because the employer will have failed in its obligation to allow the employee to take leave.
In order to avoid any dispute between the employee and his employer, it is therefore preferable to plan the annual leave in advance. In many companies, employees rely on the fact that flexibility has always been offered to allow postponement. This flexibility is not granted by default and is at the sole discretion of the employer.
How to best manage the issue of unused days
There are several methods to improve your leave management and limit the situations with untaken leave days at the end of the period. With the leave management software My Intranet, you will benefit from many features to help you in this task.
The time saving account
My Intranet integrates the management of the time saving account. Thus, the employee can carry forward paid vacations and compensatory rest hours to the next period. The employer configures the number of days that can be carried over, the period of time where the credit can be made on the time saving account and the global limit of this account.
Carrying over days
Depending on the situation, the human resources department may decide to carry over some days to the next period. Here again, My Intranet allows you to manage this in the account of each employee for each type of leave.
Anticipate the expiration of days
My Intranet integrates a very appreciated functionality that allows to alert the employee, the manager and the HR department when a counter exceeds a limit a few months before the end of the period. For example, you can configure the sending of an email each month to the employee, his manager and the HR department when his paid leave balance exceeds 15 days 3 months before the end of the period. The limit, the frequency and the number of months before the end of the reference period are fully configurable.
The employee has a summary table of his rights. The manager also has visibility on his team’s balance table by type of leave.
Payment of days
When the employee has not been able to take vacation because of the employer, he can claim the payment of a compensatory vacation allowance. The principle is that the employee’s salary is maintained during the leave. Please note that this mode of operation must remain exceptional and in no case become the rule. The payment of untaken paid vacations cannot be a usual way of managing the employee’s vacation entitlement in the company.
My Intranet allows you to check the balances of the employees at the end of the period, but also at any time if you have to carry out a calculation of compensation following a departure or the end of the work contract.
How to get paid for unused vacation days?
If you have not been able to take paid leave because of your employer, you can claim a compensation for the leave not taken. To do so, you must contact your company’s payroll department, which will assess the validity of your request based on the quota of days not taken, but also on the reasons that made it impossible to take them before the end of the period.
Communicate, follow up and give responsibility
Here are 3 key behaviors to adopt for the manager :
- Communicate with employees to inform them about the schedule of projects and activities so that they can best organize their time off in advance.
- Monitor the evolution of balances over the months and encourage the taking of days to avoid their loss.
- Empower each employee by giving them a certain amount of autonomy in the organization of their work and vacation time.
A computer tool such as My Intranet is really great to facilitate and follow the taking of vacations. Good communication is essential within the company to remind employees of the rules :
- the possibilities of postponement when they exist.
- the loss of days not taken at the end of the period, except in exceptional cases.
The risks associated with poor management
In a company where the taking of vacations is not correctly managed, the risks for the employer are multiple :
- a violation of the labor code : if the employee cannot take his vacations because of the employer (unmotivated refusal, lasting disorganization), he can fill a claim at the labor court.
- impact on cash flow and organization : when employees do not take their vacations, the counters grow and impact the company’s accounts, especially when there is a time saving account.
- risk for the employee’s health : everyone needs periods to disconnect from work. It is a vital need. An employee who does not take time off will risk being overworked, tired and unmotivated.