Vacation allowance can be interpreted as vacation payment. The meaning is the benefits provided by the company to employees who are on vacation. The minimum amount of the allowance is one month’s salary or a percentage of the total annual salary. Vacation benefits are usually included in employee benefits and written in the employment contract.
Based on the results of my search on the internet, the existence of the vacation allowance first appeared in the Netherlands, in the 1920s to be exact. At first the vacation allowance was just paid leave in general. However, most workers use their time off for vacation (vacation). Therefore, in the 1960s it was decided that the nominal leave allowance was increased so that workers had more money for vacation allowances.
So vacation allowance can be referred to as paid leave with a greater value of benefits. Each country has different regulations regarding vacation allowance. Therefore, here I will discuss vacation allowances in three countries as a comparison material. The countries I chose were the United States, the Netherlands, and Indonesia.
a. Vacation allowance in the Netherlands
In this country of a thousand mills, each employee gets a vacation allowance of 20 days or a maximum of 24 days per year. The exact number of days is determined by the employment contract, so it can vary. The value of the vacation allowance itself is 8 percent of gross income x 12 months which will be paid in May or early summer. For example, if our gross income is 5 thousand euros per month, then our vacation allowance is (5 thousand x 8 percent) x 12 = 4,800 euros.
b. Vacation allowance in the United States
In the United States, it turns out that there are no regulations governing vacation allowances. So the company has no obligation to pay a number of benefits for their employees who are on vacation. Even so, sometimes there are companies that specifically provide vacation allowances. For example, the California-based SteelHouse company provides a vacation allowance of 2 thousand USD to their employees.
Question and the answer
1. Does the calculation exclude months in which the employee is absent, sick leave, time off from work or time off at his own expense?
If in the 12 months taken to calculate the average income, the employee is relieved of work with partial or no retention of wages, these months are excluded from the calculation, except for months in which the accrued wages are not lower than salary earned in full months.
If the employee is absent, then that month is not considered an exception, because the employee has not been out of work. The month in which the employee is given time off is also not excluded from the calculation, because so far his earnings are kept in full. Months in which the employee is temporarily disabled or granted unpaid leave are excluded from calculating vacation pay if the income for these months (excluding benefits) is lower than the earnings for the full month.
2. Is the downtime payment due to employee error taken into account at 2/3 of the rate when calculating vacation pay? Should the months in which the downtime is announced be excluded from the calculation?
Downtime is a temporary absence from work due to the nature of production or the economy, because an employee does not complete all working days due to downtime in a given month, this month has not been completed.
Wages earned in that month must be compared with wages earned in the full month. downtime is not taken into account in the salary composition for incomplete months, as it is not a payment for hours worked, work performed or average retained earnings. If salary (excluding downtime payments) is at the level of a full month’s salary, that month remains in the calculation and any accrued payments for the current month, excluding downtime payments, will be taken into account when calculating vacation pay. Otherwise, this month and all payments made in it should be excluded.
In situations where there is not a full month in the billing period and vacation pay is calculated on an hourly basis, only the actual hours worked and the salary earned for them are taken into account. In this case, downtime and payments for it are not taken into account
3. How to calculate the average daily income, if the billing period for all months is incomplete?
There may not be a full month in the billing period, this happens in the case when leave is granted to the employee during the month of work or if during the billing period the employee works the whole month, but for each of the employees the employee is on sick leave, on vacation at expense himself, or declared unemployed through no fault of his.
In such a situation, by calculation, the income for the whole month is determined
First, hourly pay is found. For this, the salary (if necessary, taking into account the adjustment of the correction factor), obtained for the billing period, is divided by the actual number of hours worked during this period. In this case, only the calculated payments are accrued for time worked, work performed . Average earnings, if kept in the billing period, are not included in salary.
Then the average monthly salary is determined. To do this, the hourly wage is multiplied by the calculated monthly average number of hours worked (in 2020, with a five-day work week – 169.3 hours (2032 hours / 12 months), by a six-day work week – 168.8 hours (2026 hours / 12 months).).
The final step is to calculate the average daily income. Average monthly salary divided by 29.7 days.
If the employee does not start work, but needs to calculate the average income saved during leave or leave in connection with education, proceed from the rates (salary salary, official salary, salary) specified in the employee’s employment contract. That is, this value is divided by 29.7 days and the average daily income is received.
4. What’s new in the calculation of the correction factor?
The calculation of the correction factor needs to be considered if during the billing period or during the holiday, employees work in various working professions. As before, in this situation, the correction factor is calculated in proportion to the separate hours worked before and after the corresponding period of work for each of the worker’s professions (employee positions). But from 01.01.2020, basic salary, base rate, rate of salary rate, rate of rate of the first category, applicable in the period in which payments are made on the basis of average income are taken into account.
Example
For example, a mechanic is granted leave from work starting 03.06.2020. The employee was transferred to this position on 01/01/2020, and previously worked in this organization as a driver. Average earnings are calculated for the period from 06/01/2019 to 05/31/2020. The organization does not apply the first category rate. To calculate the correction factor in June – December 2019 the driver wage rate in June 2020 was applied, and in January – May 2020 – the employee wage rate was set in June 2020 for mechanic positions.
Previously, as the basis for calculating the coefficients related to the previous profession (position), the indicated indicators were used that were valid in the month prior to the change of profession (position).
The previous procedure for calculating the correction factor separately is applied if in the period used to calculate average earnings, the following occurs:
reduction of basic salary, basic rate, tariff rate (salary rate), first category rate.
Changes in the remuneration system
In the event that during the billing period the employee has different qualifications, starting from 01/01/2020 the correction factor is calculated in general.
