Annual Leave Cannot Be Exchanged for Money – What Every Employer Should Know

In the next revealing of our ‘holiday’ reflections, we will address the issue of converting holiday leave into cash benefits (we previously wrote about the possibility of recalling an employee from holiday leave: [READ HERE] and the possibility of interrupting holiday leave: [READ HERE]

Annual leave is an inalienable right

Pursuant to Article 152 § 1 of the Labour Code, an employee is entitled to an annual, uninterrupted, paid leave. Importantly, in accordance with § 2 of the same article, an employee cannot waive the right to leave.

In HR practice, the question often arises whether an employer may pay a monetary equivalent instead of granting annual leave. According to current case law and labour law regulations, annual leave constitutes an inalienable right of the employee, which must be taken in kind. This means that the employee should actually use the days off, rather than receiving monetary compensation during the employment relationship.

Attempting to “buy out” leave during employment not only violates the Labour Code but may also adversely affect employee satisfaction and health. Furthermore, an employer cannot force an employee to relinquish their right to leave. The decision to take annual leave rests solely with the employee, with exceptions limited to accrued leave that must be used by 30 September of the following year and leave during the notice period.

Monetary compensation – only after termination of employment

Pursuant to Article 171 § 1 LC, if the entitlement to leave is not fully or partially used due to the termination or expiration of the employment relationship, the employee is entitled to a monetary equivalent.

This means that the monetary equivalent for unused leave may be paid only after the employment relationship ends. This applies in situations where the employment contract terminates for various reasons, including resignation, expiration, or, in exceptional cases, the employee’s death.

Paying the equivalent during employment is contrary to labour law and may result in employer liability. Therefore, it is essential to maintain accurate records of leave taken and monitor the leave balance to correctly calculate the due monetary equivalent upon termination of employment.

Moreover, the employer is obliged to grant the employee any accrued leave no later than 30 September of the following calendar year. Failure to provide leave within this timeframe may result in liability for an offence against employee rights. In extreme cases, where accrued leave has been deferred over several years, the failure to grant leave in kind does not entitle the employee to a monetary equivalent before the end of employment. Leave must still be granted, and failure to do so may expose the employer to penalties.

The Labour Code provides for criminal sanctions for violations of leave rights. Pursuant to Article 282 § 1 LC, anyone who, contrary to their duty, fails to grant the employee the entitled annual leave (or unjustifiably reduces its duration) is subject to a fine ranging from PLN 1,000 to PLN 30,000.

Summary
Annual leave is a fundamental right of the employee that cannot be negotiated for monetary compensation during employment. Payment of a monetary equivalent is permissible only upon termination of the employment relationship. Any attempt to circumvent the regulations, even with the employee’s consent, exposes the employer to legal and financial liability.

Ensuring proper leave administration not only minimizes legal risks but also positively affects team efficiency and engagement. In the long term, it strengthens the company’s reputation as an employer that complies with the law and cares for its employees.

Authors: 

attorney at law Marta Strzecha-Bociąga

legal assistant Julia Sośniak