Compensation for unused vacation: features and examples of calculation

Upon dismissal of an employee, the employer is obliged to make a full final settlement and pay monetary compensation for all unused days of annual basic and additional annual vacations, as well as for unused days of additional social vacation for employees with children. If the employee dies, such compensation is paid to their family members, and in their absence, it is included in the inheritance. For pedagogical, scientific-pedagogical, scientific workers, and heads of educational institutions who have worked for at least 10 months in the respective working year prior to dismissal, compensation is paid based on the full duration of the annual vacation. (Legislation of Ukraine)

At the employee's request, unused vacation can be granted with subsequent dismissal. In this case, the day of dismissal is considered the last day of the vacation. Exception — dismissal for violation of labor discipline: in this case, the "vacation with subsequent dismissal" scheme is not applied. (Legislation of Ukraine)

Which vacations are compensated

Compensation is strictly applied to those vacations directly named in Article 24 of the Law "On Vacations" and Article 83 of the Labor Code: annual vacations and additional social vacation for employees with children. This is important for HR and accounting records: during the final settlement, it is necessary to separately determine the balance of annual vacations and separately — unused days of the "children's" social vacation, if the employee was entitled to it. (Legislation of Ukraine)

During martial law, the employer may limit the provision of annual basic vacation to 24 calendar days for the current working year, and unused days exceeding this limit are carried over to the period after the termination or lifting of martial law. However, this rule applies specifically to the granting of vacation, not the loss of the right to it. If the employee is dismissed, the employer must apply the general rules for compensation of unused days provided by the Law "On Vacations" and the Labor Code. (Legislation of Ukraine)

When compensation can be paid without dismissal

Without dismissal, monetary compensation is only partially possible and only at the employee's request. Replacing part of the vacation with money is allowed if the annual and additional vacations actually granted to the employee amount to at least 24 calendar days. For employees under 18 years of age, replacing vacation with monetary compensation is not allowed. (Legislation of Ukraine)

A separate special case — employees conscripted for military service. At their request and based on an application, they may be paid compensation for all unused days of annual vacation and additional social vacation for employees with children, without dismissal. Such an application must be submitted no later than the last day of the month in which the employee was released from work due to conscription. The employer cannot pay such compensation on their own initiative without the employee's application. (Legislation of Ukraine)

Payment terms and documents

All amounts due to the employee upon dismissal, including compensation for unused vacation, are paid on the day of dismissal. If the employee did not work on that day, the payment must be made no later than the next day after the demand for calculation is presented. On the day of payment, the employer is obliged to notify the employee in writing of the accrued and paid amounts, indicating each type of payment. If there is a dispute between the parties regarding part of the amounts, the undisputed part must still be paid on time. (Legislation of Ukraine)

For the employer, this means that before the dismissal date, the following must be prepared at a minimum: a correct calculation of unused vacation days, a calculation of the compensation amount, a written notification to the employee of all due payments, and in special cases — the employee's application for vacation with subsequent dismissal, for partial monetary compensation without dismissal, or for payment of compensation during military service. (Legislation of Ukraine)

How to calculate the compensation amount

Compensation is calculated according to the rules of Procedure No. 100. The basic formula is as follows: the total earnings for the calculation period are divided by the number of calendar days of the calculation period participating in the calculation, and the resulting average daily wage is multiplied by the number of unused vacation days being compensated. In peacetime, holidays and non-working days established by law are excluded from the calculation. During martial law, the norms of Articles 73 and 78-1 of the Labor Code do not apply, so the rule on disregarding such days works taking into account special martial norms. (Legislation of Ukraine)

The general rule for the calculation period is the last 12 calendar months of work preceding the month of compensation payment. If the employee has worked for less than a year, the average wage is calculated based on the actual working time — from the first day of the month after hiring to the first day of the month in which the compensation is paid. If the employee was hired not from the first calendar day of the month, but it was the first working day of the month, such a month is included in the calculation period as full. (Legislation of Ukraine)

A separate special rule is still relevant in 2026: if the employee acquired the right to vacation days before December 31, 2023, and they were not used or compensated, the average wage for compensating these specific days is calculated based on payments accrued in 2023. Therefore, upon dismissal in 2026, the employer sometimes has to divide the vacation balance into "days before 31.12.2023" and "days after 01.01.2024" if the employee has accumulated old balances. (Legislation of Ukraine)

The time when the employee did not work and their earnings were not saved or were partially saved is excluded from the calculation period. Also excluded is the time for which there is no data on accrued wages due to hostilities during martial law. If there is no calculation period, the average wage is determined from the tariff rate or official salary, and if the salary is less than the minimum wage — from the minimum wage at the time of calculation; for part-time work — proportional to the terms of the employment contract. (Legislation of Ukraine)

The calculation includes all amounts of accrued wages according to the legislation and employment contract, as well as bonuses and other incentive payments according to the rules of their distribution by periods. For vacations and compensation for unused vacations, payments for the time when the employee retained average earnings and temporary disability benefits are additionally included in actual earnings. (Legislation of Ukraine)

Not included are, in particular, one-time payments for individual assignments that are not part of labor duties, lump-sum payments, financial assistance, severance pay, the compensation for unused vacation itself, travel expenses, state aid, social and other compensatory payments, as well as a number of other payments explicitly listed in paragraph 4 of Procedure No. 100. (Legislation of Ukraine)

Taxes and contributions

For tax purposes, compensation for unused vacation is income related to labor relations, i.e., salary income. The employer withholds personal income tax from it, as well as a military tax, and transfers these amounts to the budget upon payment. As of the publication date, the personal income tax rate for such income is 18%, and the military tax rate is 5%. (cv.tax.gov.ua)

Regarding the single social contribution (SSC), the point in time of accrual is important. If the compensation was additionally accrued after the termination of labor relations, the STS clarifies that SSC is not charged on such an amount, since after dismissal the enterprise is no longer an insurer regarding this person. However, if the compensation is accrued within the normal final settlement upon dismissal, the employer applies the general rules of Law No. 2464. (nvp.tax.gov.ua)

Employer's responsibility

If the employer did not pay compensation on time through their own fault, the employee is entitled to average earnings for the entire delay period up to the day of actual settlement, but not for more than six months. If there is a dispute between the parties about the amount of due sums and the dispute is resolved fully or partially in favor of the employee, this reimbursement can also be awarded by the court — within the same six-month limit. (Legislation of Ukraine)

In addition to the obligation to pay the employee the due amounts, the employer may bear financial responsibility under Article 265 of the Labor Code, and officials — administrative responsibility under Article 41 of the Code of Administrative Offenses. During martial law, a special norm applies: if, after an unscheduled inspection, the employer fully and within the established period fulfills the prescription to eliminate the violation, fines under Article 265 of the Labor Code are not applied. (Legislation of Ukraine)

An illustrative official example from the practice of the State Labor Service: during martial law, an employee complained about an incomplete settlement upon dismissal, specifically the non-payment of compensation for unused vacation. After the appeal and an unscheduled control measure, the employer was issued a prescription, and the employee was paid all due funds, including compensation. (pd.dsp.gov.ua)

Official sources