What is payment for untaken leave?
Under French law, all employees are entitled to a minimum of five weeks’ paid vacation per year. However, some vacations may not be taken at the end of the reference period, in which case they are generally lost, except in certain special cases.
Untaken paid leave must be paid in the following cases:
- End of contract Termination of contract: whether by resignation, dismissal or retirement, any leave earned but not taken must be remunerated.
- Exceptional incidents Exceptional incidents: when an employee is unable to take leave (prolonged illness, maternity leave, workplace accident), unused leave can be carried over.
However, in the absence of valid reasons, untaken leave does not entitle the employee to additional payment. Failure to comply with this obligation may result in sanctions for the employer, such as claims before the industrial tribunal or fines of up to €750 per offence, in accordance with article R3141-3 of the French Labor Code.
Vacation reference period: May to May
In France, the reference period for the acquisition and taking of paid vacations is from June 1st to May 31st of the following year, unless otherwise stipulated in a collective agreement.
This acquisition period enables employees to accumulate paid vacation entitlements, often at the rate of 2.5 working days per month worked. Once these rights have been acquired, they must be used by May 31 of the year following the end of the reference period, failing which they will be lost, barring exceptions.
Remember: leave earned for the period from June 1, 2023 to May 31, 2024 must be taken before May 31, 2025.
For employees on a fixed day rate, a company or branch agreement may provide for leave to be deferred until December 31 of the year following the year in which the period for taking such leave began..
However, there are a number of special cases that can influence this management approach:
- A change in tax period Some companies adapt their reference period to match their accounting year.
- Collective agreements Collective bargaining agreements: these may provide for different conditions, such as a longer vesting period or additional rights.
- Vacation carryover In certain circumstances, internal agreements allow unused leave to be carried over to the following year.
A good understanding of this period is essential to avoid errors and ensure compliance with current regulations.
Financial consequences of untaken leave for companies
When paid vacations are not taken, the financial consequences for companies can be considerable. These consequences include
- Additional payments Vacation pay: leave not taken at the end of a contract (permanent or fixed-term) and whatever the reason for the end of the contract (resignation, contractual termination, redundancy) must be paid. This can represent an unforeseen burden on the budget, especially for SMEs.
- An accounting provision Accounting provisions: companies have to record unused vacation days as a provision on their balance sheet, which can affect profitability.
- A risk of litigation The employer is responsible for organizing paid leave, and is obliged to ensure that it can be taken. The employer is responsible for the organization of paid leave, and has a duty to ensure that it can be taken. Thus, if leave cannot be taken because the employer has prevented it – systematic refusal, excessive workload, poor organization – then the employee is entitled to claim payment of vacation pay.
So it’s vital to anticipate the costs that untaken leave can generate, in order to maintain sound financial management.
How do you set up an effective leave management policy?
To avoid the accumulation of untaken leave, several strategies can be implemented:
- Encouraging people to take time off Employers can encourage employees to plan their vacations throughout the year to avoid postponements. For example, bonuses or benefits can be offered to encourage employees to take leave before the end of the reference period. Internal awareness-raising campaigns on the benefits of time off for well-being and productivity can also be organized.
- Use management tools Specialized software such as Timmi Absences from Lucca or Payfit enable real-time monitoring of each employee’s leave balance, generating alerts in case of accumulation, and automating leave requests. These tools often offer clear dashboards for managers and employees, facilitating absence planning.
- Calling on a timeshare HR : Calling on a timeshare HR expert enables us to establish a policy tailored to the company’s specific needs. This professional can analyze needs, suggest adjustments to vacation schedules and raise awareness of the importance of planning absences.
- Set a clear timetable : It’s essential to plan vacation periods from the start of the year to anticipate needs. For example, a system of predefined “windows” for taking leave can be set up, with automatic reminders sent to employees to reserve their dates.
Proactive management of paid leave helps reduce financial risks while improving employee satisfaction.
Communicating with employees about their rights and responsibilities
Clear and regular communication with employees helps ensure optimum management of paid leave and minimize the volume of untaken leave. Here are a few best practices that can easily be implemented within your organization:
- Inform employees of their rights Every employee needs to understand how paid leave works, in particular the reference period, and to know the consequences of untaken leave (loss of leave in most cases).
- Provide regular reminders Regular reminders: notifications can be sent out to remind you of vacation deadlines.
- Promoting well-being The importance of disconnection for mental health and overall productivity.
This kind of communication gives everyone a sense of responsibility when it comes to taking time off, and encourages better internal organization.
Examples and testimonials of good practice
Our Time-sharing HRD are frequently called upon to help companies manage their vacation time and limit the accumulation of untaken paid leave. Among the solutions on offer, schemes such as the CET (Compte Epargne Temps) or the PERECO (Plan d’Epargne Retraite d’Entreprise Collectif) (formerly known as PERCO) are particularly effective.
The CET allows employees to save their unused leave for use at a later date, while the PERECO offers the possibility of converting these days into an annuity to prepare for retirement. In addition to meeting financial challenges, these solutions enhance the company’s social policy and strengthen its image. attractiveness as an employer.
Although these solutions are often provided for in collective bargaining agreements, it is still up to the company to set the terms and conditions. A timeshare HR manager can support you from A to Z.
Conclusion
Managing paid leave, and in particular unused leave, is a major challenge for SMEs. A good grasp of the legal rules, effective communication and an appropriate policy are essential to minimize costs and avoid disputes.
For further information, we recommend consulting an HR expert who can assess the situation and propose tailor-made solutions. This will ensure optimum management of paid leave and improve the company’s overall performance.