Calculating holiday entitlement and the balance

Holiday looks like a simple item — until the year-end arrives, or a contract is terminated and you have to work out the outstanding balance. It is one of the points where payroll goes wrong most often. Here is how it works in Switzerland, under the Code of Obligations (CO).

The legal minimum

The CO guarantees every employee a minimum annual holiday entitlement:

at least 4 weeks for all employees;
at least 5 weeks for young people up to the age of 20.

An individual contract or a collective agreement (CLA) may provide for more, never less. Weeks are counted in working days: four weeks generally correspond to 20 days for those working a five-day week, 24 for those working six.

Pro rata accrual

Holiday entitlement accrues progressively over the year, in proportion to time worked. Those who join or leave mid-year therefore have a pro rata temporis entitlement. The practical rule: for each full month worked, one twelfth of the annual entitlement accrues.

For an employee with 4 weeks (20 days) a year, roughly 1.67 days of holiday accrue each month. The balance at the end of employment is built on this.

Pay during holiday

During holiday the employee is entitled to full pay, as if they were working. For those on a fixed monthly salary this is automatic: payment continues during the leave. But regular, non-occasional components must also be taken into account (for example recurring commissions), which count towards the reference salary.

For hourly or on-call workers with irregular employment, it is permissible to show the holiday allowance as a percentage supplement on the hourly wage: about 8.33% for 4 weeks and 10.64% for 5 weeks. In this case the supplement must appear expressly in the contract and on the pay slip, otherwise it remains owed on top of the salary.

When holiday can be reduced

Entitlement can be reduced in the event of prolonged absences during the year:

for incapacity through the employee’s own fault, the reduction is possible from the first full month of absence;
for incapacity through no fault (illness, accident, pregnancy, military service), the law grants a one-month grace period: no reduction if total absence does not exceed one month; beyond that, entitlement can be reduced by one twelfth for each additional full month of absence.

The rules are technical: applied wrongly, they generate disputes.

The ban on cashing out (during employment)

While employment continues, holiday must be taken, not paid out in cash: it serves the purpose of rest. Cash compensation is only possible at the end of employment, for days not taken. It is also the employer who sets the timing of holiday, taking the employee’s wishes into account, with at least two consecutive weeks a year guaranteed as a rule.

The balance at the end of employment

On termination the final reckoning is made:

the accrued entitlement is calculated pro rata up to the last day;
holiday already taken is subtracted;
if the balance is positive, the remaining days must be paid out (or taken during the notice period);
if the balance is negative (holiday taken in advance), the excess is generally offset, save for exceptions.

During the notice period, the employer may require remaining holiday to be taken only if enough time remains and the search for new employment is not compromised.

The mistakes that cost

Not tracking monthly accrual: at the end of employment the balance becomes disputable.
Forgetting the holiday supplement for hourly employees, or not showing it separately.
Reducing holiday while ignoring the grace month in case of illness.
Paying out holiday in cash during employment instead of having it taken.
Closing a final pay slip without settling the outstanding balance.

How we help you

The Payroll division of SIH ONE keeps the holiday count for every employee, managing accrual, reductions and the final balance, avoiding arrears and disputes at the end of the employment relationship. Entrust us with your payroll.