At the end of an employment contract, it sometimes turns out during the settlement process that the departing employee has accumulated a backlog of vacation days. The financial compensation for this regularly exceeds several months’ salary. A nice penny for the employee, but a less pleasant surprise for the employer. This is because they often assume that most of the vacation days had long since expired. But, that is not always the case. How do you prevent such dams? In this post you will read the answer.
Statutory versus non-statutory vacation days
There are (a) statutory vacation days and (b) non-statutory vacation days. Statutory vacation days are the minimum vacation days to which the employee is entitled by law. The number of statutory vacation days is four times the weekly number of working hours. Thus – assuming the same number of working hours – this is always four full weeks. However, many employees are entitled to more vacation days than this legal minimum. These extra vacation days are called the extra statutory vacation days. How many vacations above the statutory minimum an employee has, follows from the individual employment contract or the collective bargaining agreement.
Example: employee X works on a full-time basis. His employment contract states that he is entitled to 25 vacation days per year. The total number of vacation days can be broken down as follows:
Expiration and prescription of vacation days
In principle, saving unlimited vacation days is not possible. Indeed, vacation days that are not taken expire or become time-barred after a period of time. Thus, employees are encouraged to take vacation days regularly and fulfill the function of vacation, namely: recuperate. The difference between expiration and limitation is that a limitation period can be extended by the employee and an expiration period cannot. Whether a vacation day lapses or is time-barred depends on the type of vacation. Statutory vacation days expire after six months after the calendar year in which they were accrued (provided the employee is properly informed by the employer, see below). Extra-legal holidays lapse after five years after the calendar year in which they were accrued. In addition, the statute of limitations for these super-legal vacations can be prevented (interrupted) by the employee with a letter or e-mail to the employer. This communication – which must be sent before the expiration of the statute of limitations – must show that the employee wishes to continue to be entitled to these excess days after the statute of limitations has expired. This starts a new five-year limitation period.
Example: employee X accrues 25 vacation days in the year 2020 according to his employment contract: 20 statutory vacation days and 5 non-statutory vacation days. The 20 statutory vacation days expire on July 1, 2021 (six months after the calendar year in which the days were accrued). The 5 super-legal vacation days do not expire until January 1, 2026. If employee X informs his employer in writing before January 1, 2026, that he wishes to continue to retain his entitlement to the above-legal vacation days, the five-year period will be extended by another five years. Thus, in that case, the supervisory vacation days accrued in the year 2020 will remain tenable until no later than January 1, 2031.
Obligation to inform employers
Note that vacation days do not always expire. In fact, employers are required to actually allow their employees to take vacation. If the employer fails to do so, the result is that the vacation days do not expire or are time-barred (and thus remain “sustainable” for longer). This can lead to unintended accumulations of vacation days. What exactly does this duty entail? Employers do not have to force their employees to go on vacation. However, they do have to inform their employees in a concrete and timely manner about the consequences of not taking vacation days on time. Only when the employer has complied with this information obligation – and he can also prove it – does the statutory expiration period of six months apply.
Specifically, what should you do?
Employers would therefore do well to inform their employees in writing at least once a year about (a) the amount of their leave balance, (b) that statutory vacation days must be taken by July 1 of the following year, and (c) that those vacations will expire if they are not taken on time. Merely referring to an HR system where employees can check their leave balance is not enough. Also, always save the written notification in the personnel file so that you can later prove that you, as an employer, have periodically fulfilled the obligation to inform. It should be noted that the vacations that expire or become time-barred first are taken first.
To comply with the information requirement, the following text can be used: ‘With this letter we inform you that you still have [number] vacation days outstanding. Of these, [number] days are to be considered statutory vacation days and [number] days as extra-legal vacation days. You must take the statutory vacation days before July 1 [year]. If you don’t, they expire. That means you can no longer take them and will not be paid out. Statutory vacation days remain valid for five years after the year in which they were accrued. You must also take those vacation days on time. If you have any questions as a result of this post, please let us know.
Do you have any questions as a result of this article? If so, please contact one of our employment law specialists.
