Compensation for unused vacation in 2024: features and examples of calculation

In September 2023, changes were made to the calculation of the average salary. This affected the calculation of compensation for unused vacation.

Let's find out what are the rules for compensation of vacation leave upon dismissal in 2024 in Ukraine.

Innovations in compensation for unused vacation

On September 8, 2024, the Cabinet of Ministers adopted Resolution No. 957. According to its provisions, some changes were made to Procedure No. 100. The novelty concerned the calculation of the average salary for the payment of compensation for unused vacation days to which an employee is entitled. If the employee has not used the vacation until December 31, 2023, such compensation calculations will be made based on the payments accrued in 2023.

Based on these changes, as early as 2023, when an employee was dismissed, entrepreneurs accrued monetary compensation to him or her under the new rules. For example, when an employee was dismissed in December, payments accrued in 2023 were used to calculate monetary compensation. Therefore, the calculation period was from January 1 to November 30, 2023.

Examples of compensation for unused vacation upon dismissal

Here is the first and simplest example:

But this case is simple, because the employee does not have any parental leave, and he does not yet have enough seniority to receive vacation days in 2024.

The following example:

However, the peculiarity of parental leave is that this type of leave is not included in the period worked. Therefore, when a new calendar year begins, this leave will be accrued in full for 10 days. Accordingly, when an employee is dismissed on January 5, 2024, two types of compensation balances are already available. As of December 31, 2023, it is the main type of unused vacation plus parental leave, and as of 2024, it is fully accrued parental leave.

Therefore, two types of accruals must be made. The first type of accrual is monetary compensation for unused vacation days as of December 31, 2023. The second type of accrual is monetary compensation in 2024, but according to the law, it is calculated on the basis of payments for the last 12 months. And in our case, the calculation periods for the two types of accruals when an employee is dismissed in January of the current year are completely the same.

The third example:

To avoid confusion about the periods and the balance of unused vacation days, you can make the appropriate settings in the accounting software. This will help to automatically and timely accrue the required amount of monetary compensation. 

Formula for calculating vacation pay

To calculate vacation pay, use the following formula:

In doing so, you should pay attention to the following points:

1. The duration of the vacation period is calendar days, excluding holidays and non-working days. At the same time, for the period of martial law, pursuant to Law No. 2136, starting from March 24, 2022, holidays are canceled and equated to working days.

2. Days off, including Saturdays and Sundays, are not deducted and are included in the vacation.

3. The average daily salary is calculated in accordance with Procedure No. 100. To calculate it, you need to divide the payments of the payroll period by its duration.

The calculation period is individual for each employee:

• for those employees who have been with the company for more than one year, this period is the last 12 months;

• if an employee works for less than one month, the actual time worked will be considered as the payroll period;

• full months worked are counted if the person worked from one to 11 months.

When is compensation for unused vacation paid?

Law No. 504/96-VR states that monetary compensation is paid to an employee upon dismissal. The compensation includes all the days of annual vacation that have not been used by that person. This amount also includes additional leave granted to employees for children or disabled children.

Compensation for unused vacation is paid to military personnel on the basis of an application and at their own request.

What payments of the settlement period should be taken into account when calculating compensation?

This includes all payments that were accrued to the employee during the pay period, namely:

• bonuses and remuneration for labor;

• official salary;

• allowances and surcharges;

• difference in salaries if the employee temporarily performed the duties of an absent employee, etc.

Is compensation for unused vacation paid without dismissal?

According to the law, an employee may receive partial monetary compensation, in addition to social benefits, but not for the full period of unused vacation, but for a part of it. To do this, they need to write a corresponding application to the company's director. However, this is only possible if the duration of such leave, including additional leave, is at least 24 calendar days.

If an employee is transferred to another company, this type of compensation is not provided.

In what other cases is an employee entitled to compensation for unused vacation?

Employees are entitled to receive compensation for unused vacation time during their probationary period. Thus, if the employee is dismissed after the probationary period, he or she must be paid severance pay, just like other employees.

Seasonal and temporary employees are also entitled to compensation. According to the Ukrainian Labor Code, they have the same rights and guarantees as permanent employees.

A person who resigns from an enterprise has the right to receive compensation for the period of social leave. This refers specifically to parental leave, which is granted for the full duration with the onset of a new calendar year.

Liability for violation of the law on compensation

If an entrepreneur violates the applicable law and fails to comply with the state's labor remuneration guarantees, such employers are liable under Article 265 of the Labor Code.

In this case, legal entities and individual entrepreneurs must pay a fine equal to two times the minimum wage. The fine is paid for each employee in respect of whom a violation was found.

Employee rights that have been violated during dismissal can be protected in court. 

Therefore, in order to establish high-quality labor relations in accordance with the current laws, it is necessary to follow innovations and comply with regulations.