Compensation for unused leave – deadlines and employer obligations 

Terminating an employment contract entails a number of obligations on the employer’s part. One of these is the proper settlement of an employee’s unused vacation leave. In 2026, regulations came into force that, for the first time, specify the deadline for payment of compensation for unused vacation leave. 

From January 27, 2026, compensation for unused leave must be paid on the employer’s applicable payroll due date. If the payroll due date falls before the termination of the employment contract, the compensation must be paid within 10 days of the termination of employment. 

For HR and payroll departments and for employees as well, these changes in regulations mean greater legal certainty, but also the need to adapt existing HR and payroll processes. 

What is the compensation for unused leave? 

Cash compensation for unused vacation leave is a benefit payable to an employee who, upon termination or expiration of their employment relationship, has not used all or part of their vacation entitlement. The legal basis for this is Article 171 of the Labour Code. 

In practice, this means that if an employee terminates employment and is unable to use the remaining leave days before the contract ends, the employer should pay appropriate financial compensation. 

What has changed since 2026? 

Until January 26, 2026, the regulations did not explicitly specify the deadline for payment of compensation for unused leave. It was assumed that payment of compensation should occur on the date of termination of the employee’s employment. This resulted in numerous uncertainties and discrepancies in employer practices and necessitated the creation of separate payrolls by employers. As of January 27, 2026, new provisions of Article 171 § 4 and § 5 of the Labour Code have been in force, specifying the deadline for payment of this benefit. 

General rule

The compensation for unused leave must be paid within the deadline for payment of remuneration applicable to the employer, established in accordance with Article 85 of the Labour Code. 

This solution is more convenient for employers because it allows for the payment of benefits to be included in a single payroll cycle, without the need to create separate payrolls. This means that in most cases, the employee will receive the equivalent together with their final salary. 

An exception to the general rule

If the employer’s payday falls before the employee’s employment ends, the employer is obligated to pay the equivalent within 10 days of the termination of employment. It is also worth noting that if the designated payday falls on a public holiday, the equivalent should be paid earlier (on the last business day before the designated date). 

When exactly should the compensation be paid? 

The payment date depends on when the salary payment day falls in a given organization. 

Let’s look at the scenarios below

Can the compensation be paid out earlier?

Yes. The regulations specify a maximum payout period, not a minimum. 

There is nothing to prevent the employer from paying the equivalent on the last day of employment, a few days after the termination of the employment relationship or together with the employee’s final settlement. 

From an organizational point of view, this is often the most convenient solution for both the employee and the payroll department. 

Table summarizing changes in determining the salary payment date 

How to calculate the amount of holiday pay? 

Establishing a payment date is only the first part of an employer’s responsibilities. Correctly calculating the compensation amount is equally important. 

When determining the basis for calculating the allowance, the employer should take into account: 

1. Fixed components 
   The base includes remuneration components defined in a fixed monthly amount, e.g.: 
   -basic salary, 
   -fixed allowances, 
   -statutory bonuses paid at a fixed amount. 
   They are taken into account in the amount due in the month in which the right to the compensation is acquired. 

2. Variable components 
   Variable remuneration components payable for periods no longer than one month, such as: 
   -commissions,
   -discretionary bonuses of a variable nature, 
   -performance-based bonuses. 
   As a rule, it is assumed to be the average of the three months preceding the month of termination of employment. 

3. Periodic components 
   Periodic components of remuneration payable for periods longer than one month, such as: 
   -quarterly bonuses, 
   -semi-annual commissions 
   -annual bonuses. 
   The basis for the leave compensation is assumed to be the average of the twelve months immediately preceding the month in which the right to the equivalent is acquired. 

Then, the average monthly compensation basis is divided by the compensation coefficient applicable in a given workplace, by the working time standard and converted into the number of hours of unused leave. 

What are the most common mistakes made by employers? 

In practice, the following irregularities are most frequently encountered: 

In practice, the greatest risk for employers does not stem from the obligation to pay compensation per se, but from incorrectly determining the number of days of compensation, the payment deadline, or incorrectly calculating the compensation basis. These are the areas that most often become the subject of disputes with employees and inspections by the National Labour Inspectorate (PIP). 

Why is it worth streamlining the holiday settlement process? 

Changes in regulations show that the legislator is placing increasing emphasis on the timeliness and transparency of employee settlements. 

For employers, this means the need to: 

In organizations employing a large number of employees, process automation and professional HR and payroll management are particularly important. Timely settlement of vacation allowances requires constant monitoring of changes in regulations and proper maintenance of employee records. 

FAQ – employers’ most frequently asked questions