According to the Labor Law (Article 76 and 77), an employee has the right to paid annual leave for each calendar year, lasting at least four weeks. However, minors and employees working in jobs where, despite the application of health and safety measures, it is not possible to protect the worker from harmful influences, have the right to annual leave lasting at least five weeks. Similarly, individuals with disabilities have the right to paid annual leave lasting at least five weeks for each calendar year. Nonetheless, through a collective agreement, an agreement between the workers' council and the employer, work regulations, or an employment contract, the duration of annual leave longer than the minimum prescribed can be determined. In cases where a right from the employment relationship (in this case, annual leave) is differently regulated by these sources of law, the most favorable right is applicable to the employee. It should be noted that an employee who is newly employed or who has a break between two employment relationships longer than eight days gains the right to full annual leave only after six months of uninterrupted employment with that employer.

Employers are obligated to establish a schedule for the use of annual leave, in accordance with the collective agreement, work regulations, or employment contract, no later than June 30 of the current year. Employers with established workers' councils must consult with the workers' council or union representative about the schedule for the use of annual leave. When determining the schedule for annual leave, the needs of work organization and the available opportunities for rest for the employees must be taken into account. The employer must notify the employee of the duration of the annual leave and the period of its use at least fifteen days before using the annual leave. An employee is entitled to use one day of annual leave as they wish, with the obligation to notify the employer at least three days before its use, unless there are specific justified reasons on the employer's side preventing it.

For employees who work part-time for two or more employers and employers do not reach an agreement on simultaneous use of annual leave, the employee must be allowed to use annual leave according to their request.

The duration of annual leave for an employee is determined by the number of working days based on the employee's weekly work schedule. For example, an employee who works 5 working days per week (from Monday to Friday) is entitled to 20 days of annual leave, while an employee who works 6 working days per week (from Monday to Saturday) is entitled to 24 days of annual leave. An employee whose employment relationship ends exactly in the middle of a month with an even number of days is entitled to one twelfth of the annual leave for that month, which they earn with the employer with whom their employment relationship ends. Holidays and non-working days determined by law, periods of temporary incapacity for work established by an authorized physician, and days of paid leave are not included in the duration of annual leave. In exceptional cases, if according to the work schedule, an employee should work on a holiday or non-working day determined by law, but they choose to use annual leave on that day, that day is included in the duration of annual leave.

If an employee has not fulfilled the condition for acquiring the right to full annual leave, they will have the right to a proportional part of annual leave, which is determined by one twelfth of the full annual leave for each month of employment. Exceptionally, an employee whose employment relationship ends is entitled to a proportional part of annual leave for that calendar year. However, an employer who allowed an employee to use annual leave for a longer duration than what would be entitled to them before the termination of the employment relationship will not have the right to demand reimbursement of the salary paid for the use of annual leave. When calculating the duration of the proportional part of annual leave, at least half a day of annual leave is rounded up to a whole day, and at least half a month of work is rounded up to a whole month. Regarding the calculation of the proportional annual leave, the Ministry of Labor, Pension System, Family, and Social Policy has provided its brief opinion on calculation based on a real example: "Since in your inquiry you state that your employment relationship lasted from November 15, 2021, to March 30, 2022, we believe that for the year 2021, you are entitled to annual leave for a duration of 2/12 of the total number of days you would be entitled to, while for the year 2022, you are entitled to annual leave for a duration of 3/12 of the total number of days you would be entitled to." (MRMS, published on May 10, 2023, on the website of the Ministry).

For employees who use their annual leave in parts, it is important to note that they must use at least two weeks of annual leave continuously during the calendar year for which they are entitled to annual leave, unless the employee and the employer agree otherwise, provided that the employee is entitled to annual leave for a duration longer than two weeks. Any unused part of annual leave can be carried over and used until June 30 of the following calendar year. Additionally, an employee who is entitled to a proportional part of annual leave shorter than two weeks can carry over and use that part of annual leave until June 30 of the following calendar year. However, an employee cannot carry over a part of annual leave (at least two weeks of continuous duration) into the next calendar year if they have been allowed to use that annual leave. The transfer of annual leave is only possible from one calendar year to another.

During the use of annual leave, an employee is entitled to a salary compensation as determined by the collective agreement, work regulations, or employment contract, and at least in the amount of their average monthly salary in the previous three months (the average salary includes all monetary and in-kind benefits that represent compensation for work).

In case of termination of an employment contract, the employer is obligated to pay the employee who has not used annual leave compensation instead of using annual leave. The compensation is determined proportionally to the number of days of unused annual leave and the amount is determined in accordance with the work regulations, employment contract, collective agreement, or the applicable source of labor law that is in force with the employer, following the legal principle of applying the most favorable right for the employee. Although the amount of compensation for unused annual leave is not prescribed by the Labor Law, this compensation is usually paid in the same amount as the salary compensation for using annual leave, and the calculation of the compensation includes the basic salary amount as well as salary supplements (variable parts of the salary) such as overtime, night work, hardship pay, and others.

Finally, it should be noted that any agreement between the employee and the employer to waive the employee's right to annual leave is void and has no legal effect according to the Labor Law (Article 80). This applies not only to agreements to waive the right to annual leave but also to any agreement to pay compensation instead of using annual leave. Therefore, an employee cannot request payment from the employer instead of using annual leave. If, contrary to this statutory provision of mandatory nature (meaning that the employer and the employee cannot agree otherwise in the employment contract, and the employer cannot contractually agree with the employee to waive the right to annual leave in exchange for compensation), the employer still enters into such an agreement with the employee, namely the waiver of the right to annual leave or payment of compensation instead of using annual leave, the employer will be liable for an administrative offense with a fine ranging from 8090.00 to 13,270.00 euros (for legal entities) or from 920.00 to 1320.00 euros (for individuals) and for the responsible person in a legal entity. If the offense is committed against a minor employee, the amount of the fine is doubled.

Anja Juršetić, Attorney at Law