Everything you need to know about compensatory compensation for paid leave

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Does your employment contract end before you can take all of your vacation? Don't panic, your employer must pay you the equivalent of your vacation in hard currencies. Details on your rights.

1 Definition of compensation for paid vacation

When an employment contract is terminated before the employee has been able to take all of his paid vacation, a compensatory indemnity is provided for the part from which he was not able to benefit.

2 Beneficiaries of compensation

The compensation for paid vacation is due whether the dismissal comes from the employee or the employer. However, it is not paid in the event of dismissal for gross negligence and for leave acquired during the current reference period.
To benefit from this indemnity, you must provide proof that the inability to take all of your paid vacation was not of your will.

3 Calculation of the amount of compensation for paid vacation

The calculation corresponds to the tenth of the remuneration paid to an employee between June 1 of the previous year and May 31 of the current year. The indemnity must not be less than the remuneration received by the employee in the event that he has continued his work during his paid vacation. Too, to define the amount of paid leave, two calculations are carried out and the most favorable to the employee is retained: the calculation to the tenth of the remuneration and the calculation on maintenance.
Calculation to tenths of remuneration : the employee who worked during the first six months of the reference period will receive an indemnity in lieu of paid leave corresponding to the total of his wages received during these six months, the whole divided by 10. The remuneration used as the basis for the calculation includes the gross salary, overtime, paid vacation allowance for the previous year, etc. On the other hand, annual bonuses and reimbursements of expenses (travel, meals, etc.) are excluded from this calculation.
Calculation on hold : the same criteria as those for the calculation to the tenth of the remuneration are taken into account. The sum corresponds to the salary that the employee would have received if he had continued to work during the paid vacation. It is generally this method of calculation which is the most advantageous for the employee.

4 Tax and social regime of the indemnity

The compensatory allowance for paid vacation has the character of a salary. It is therefore subject to income tax and social contributions under the same conditions as wages.

5 Cumulation with other indemnities

Compensation for paid vacation can be combined with the other indemnities provided for in the context of dismissal, namely: the statutory severance pay and the compensation for notice.

Read the other articles in the HR Consultant UK dossier on dismissal:

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