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How should vacation pay be calculated under the new rules? — OFFICIAL
How should vacation pay be calculated under the new rules? — OFFICIAL
The average salary for the vacation period must be calculated taking into account the requirements of Article 140 of the Labor Code. This was stated in an announcement by the Ministry of Labor and Social Protection of the Population.
It was noted that the employee’s wages for the 12 calendar months preceding the month in which the vacation is granted are summed up, and the resulting amount is divided by 12 to determine the average monthly salary. The determined amount is then divided by 30.4 to calculate the daily wage, and this amount is multiplied by the number of calendar days of the vacation period. When carrying out the calculation for the 12 calendar months preceding the vacation, months that were not worked or were not fully worked due to partially paid social leave, unpaid leave not initiated by the employee, or downtime not caused by the employee are replaced with the nearest fully worked calendar months. The amount obtained as a result of calculating the average salary for the vacation period must not be less than the employee’s last salary in accordance with Article 111 of the Code. The last salary refers to the salary stipulated in the employment contract that is in force at the time the employee goes on vacation.
Which incomes are taken into account and which are not?
- According to the Ministry’s statement, an extensive list of payments that are included and excluded in the calculation of the average salary for the vacation period was approved by Resolution No. 137 of the Cabinet of Ministers of the Republic of Azerbaijan dated August 25, 1999. The payments taken into account when calculating the average salary for the vacation period include the following:
- tariff (position-based) salary for the actual time worked;
- bonuses paid under the remuneration systems in force at enterprises, institutions, and organizations, as well as collective and individual bonuses предусмотрed by the “Regulation on the Types and Rules of Awarding State Employees,” approved by Decree No. 774 of the President of the Republic of Azerbaijan dated August 24, 2002;
- permanent coefficients and allowances of a compensatory and incentive nature (for work in heavy and hazardous conditions, in workplaces unfavorable due to climatic conditions, for night work and multi-shift work schedules, for combining professions (positions), for academic degrees, honorary titles, length of service, years of service, qualification category, execution of authority, special rank salary (allowance), etc.), as well as additional monetary compensation for representation expenses related to the execution of powers by senior officials of executive authorities and heads of city (district) executive authorities;
- payment for breaks allocated for breastfeeding a child;
- additional payments based on coefficients for work in field, arid, and high-mountain areas;
- payment for overtime work hours;
- payment for work performed on rest days, voting days, holidays, and nationwide days of mourning that are not considered working days;
- payments for the production of defective (unusable) products not due to the employee’s fault, for downtime, failure to meet production norms, interruptions, and suspension of work due to cold or hot weather conditions;
- payment for temporary substitution;
- payments in cases provided by legislation where employees’ jobs and average salaries are retained, where the difference between the previous salary and the salary at the new workplace is paid, or where the salary for the previous position (profession) is retained;
- payment for periods of forced absence from work;
- average salary retained during periods of labor, educational, and creative leave;
- benefits for temporary loss of working capacity, pregnancy, and childbirth;
- fees paid from literary royalty funds to staff literary workers of newspapers, magazines, publishing houses, radio, television, and information agencies, as well as permanent author’s fees, performer’s fees, and production fees.
- The payments not taken into account when calculating the average salary for the vacation period, as approved by the Cabinet of Ministers, include the following:
- all types of one-time additional bonuses and incentive payments (including bonuses) granted in connection with anniversaries, holidays, birthdays, and other similar occasions;
- payments for performing individual tasks not related to the employee’s official duties;
- monetary compensation for depreciation of tools, equipment, and other items;
- various types of payments provided as financial assistance;
- payments related to business trips, field expenses, allowances paid to employees whose permanent work involves travel or has a mobile nature, allowances for mobile work for employees directly engaged in construction, and allowances for work performed using a shift (rotational) method;
- the value of or compensation for housing provided free of charge to certain employees, as well as utility costs, fuel, and public transport tickets;
- the value of work clothing, work footwear, and other personal protective equipment, soap, other detergents, milk, and therapeutic and preventive food provided to employees;
- the value of free meals provided in cases stipulated by legislation (free collective meals, meals provided free of charge or on preferential terms to employees at the expense of the enterprise’s profit);
- the cost of vouchers for sanatorium and resort treatment and rest homes;
- reimbursement of housing rent and property transportation expenses when transferring to work in another area or relocating;
- scholarships paid by enterprises and organizations to employees sent for education with full or partial release from work;
- cash prizes awarded to winners of competitions, reviews, and contests;
- allowances paid at the expense of enterprises, institutions, and organizations to young specialists during the vacation period after graduation from higher or secondary specialized educational institutions;
- payments for work performed under civil-law contracts;
- compensation for unused labor leave.
- Another innovation: the timing of payment has changed
- One of the amendments to the Labor Code concerns the establishment of alternative timeframes for the payment of the average salary for the vacation period. The Ministry reported that prior to the latest amendment, under the requirements of Part 5 of Article 140 of the Code, the average salary for the vacation period had to be paid no later than three days before the start of the vacation. However, in practice, in some cases employers were unable to comply with this requirement, and as a result, there was a risk of administrative liability for violating legal requirements by failing to pay vacation pay three days in advance. The latest amendment has created a new possibility for paying vacation pay at other times. However, in this case, two main conditions must be met:
a) the payment of vacation pay at another time must be explicitly stipulated in the employment contract or collective agreement;
b) this time must not be later than the day on which the next salary payment (advance or remaining portion) is made.
Regarding the retention of the average salary, it was noted that in cases specified in the Labor Code, the employee does not actually perform their labor function. However, payment of wages for those days is mandatory. In such cases, the average salary is retained. The procedure for calculating the average salary is regulated by Article 140 of the Code during labor leave, and by Article 177 of the Code in all other cases.
The Ministry’s statement also notes that the retention of the average salary applies when an employee is on leave (labor, educational, or creative), as well as in the cases listed in Article 179 of the Code (for example, when summoned to inquiry, preliminary investigation, and court authorities as a witness, victim, expert, specialist, interpreter, or attesting witness; when participating in court proceedings for the resolution of individual labor disputes; when sent by the employer to additional educational institutions with full or partial release from work; when sent on a business trip to another region or abroad; when sent outside the workplace due to the need to protect the interests and lawful rights of the owner and to represent the employer at relevant events; when donor employees undergo medical examinations and on the days they donate blood and blood components, as well as during the time employees remain in medical institutions for medical examinations, etc.).
The average salary for the vacation period must be calculated taking into account the requirements of Article 140 of the Labor Code. This was stated in an announcement by the Ministry of Labor and Social Protection of the Population.
It was noted that the employee’s wages for the 12 calendar months preceding the month in which the vacation is granted are summed up, and the resulting amount is divided by 12 to determine the average monthly salary. The determined amount is then divided by 30.4 to calculate the daily wage, and this amount is multiplied by the number of calendar days of the vacation period. When carrying out the calculation for the 12 calendar months preceding the vacation, months that were not worked or were not fully worked due to partially paid social leave, unpaid leave not initiated by the employee, or downtime not caused by the employee are replaced with the nearest fully worked calendar months. The amount obtained as a result of calculating the average salary for the vacation period must not be less than the employee’s last salary in accordance with Article 111 of the Code. The last salary refers to the salary stipulated in the employment contract that is in force at the time the employee goes on vacation.
Which incomes are taken into account and which are not?
- According to the Ministry’s statement, an extensive list of payments that are included and excluded in the calculation of the average salary for the vacation period was approved by Resolution No. 137 of the Cabinet of Ministers of the Republic of Azerbaijan dated August 25, 1999. The payments taken into account when calculating the average salary for the vacation period include the following:
- tariff (position-based) salary for the actual time worked;
- bonuses paid under the remuneration systems in force at enterprises, institutions, and organizations, as well as collective and individual bonuses предусмотрed by the “Regulation on the Types and Rules of Awarding State Employees,” approved by Decree No. 774 of the President of the Republic of Azerbaijan dated August 24, 2002;
- permanent coefficients and allowances of a compensatory and incentive nature (for work in heavy and hazardous conditions, in workplaces unfavorable due to climatic conditions, for night work and multi-shift work schedules, for combining professions (positions), for academic degrees, honorary titles, length of service, years of service, qualification category, execution of authority, special rank salary (allowance), etc.), as well as additional monetary compensation for representation expenses related to the execution of powers by senior officials of executive authorities and heads of city (district) executive authorities;
- payment for breaks allocated for breastfeeding a child;
- additional payments based on coefficients for work in field, arid, and high-mountain areas;
- payment for overtime work hours;
- payment for work performed on rest days, voting days, holidays, and nationwide days of mourning that are not considered working days;
- payments for the production of defective (unusable) products not due to the employee’s fault, for downtime, failure to meet production norms, interruptions, and suspension of work due to cold or hot weather conditions;
- payment for temporary substitution;
- payments in cases provided by legislation where employees’ jobs and average salaries are retained, where the difference between the previous salary and the salary at the new workplace is paid, or where the salary for the previous position (profession) is retained;
- payment for periods of forced absence from work;
- average salary retained during periods of labor, educational, and creative leave;
- benefits for temporary loss of working capacity, pregnancy, and childbirth;
- fees paid from literary royalty funds to staff literary workers of newspapers, magazines, publishing houses, radio, television, and information agencies, as well as permanent author’s fees, performer’s fees, and production fees.
- The payments not taken into account when calculating the average salary for the vacation period, as approved by the Cabinet of Ministers, include the following:
- all types of one-time additional bonuses and incentive payments (including bonuses) granted in connection with anniversaries, holidays, birthdays, and other similar occasions;
- payments for performing individual tasks not related to the employee’s official duties;
- monetary compensation for depreciation of tools, equipment, and other items;
- various types of payments provided as financial assistance;
- payments related to business trips, field expenses, allowances paid to employees whose permanent work involves travel or has a mobile nature, allowances for mobile work for employees directly engaged in construction, and allowances for work performed using a shift (rotational) method;
- the value of or compensation for housing provided free of charge to certain employees, as well as utility costs, fuel, and public transport tickets;
- the value of work clothing, work footwear, and other personal protective equipment, soap, other detergents, milk, and therapeutic and preventive food provided to employees;
- the value of free meals provided in cases stipulated by legislation (free collective meals, meals provided free of charge or on preferential terms to employees at the expense of the enterprise’s profit);
- the cost of vouchers for sanatorium and resort treatment and rest homes;
- reimbursement of housing rent and property transportation expenses when transferring to work in another area or relocating;
- scholarships paid by enterprises and organizations to employees sent for education with full or partial release from work;
- cash prizes awarded to winners of competitions, reviews, and contests;
- allowances paid at the expense of enterprises, institutions, and organizations to young specialists during the vacation period after graduation from higher or secondary specialized educational institutions;
- payments for work performed under civil-law contracts;
- compensation for unused labor leave.
- Another innovation: the timing of payment has changed
- One of the amendments to the Labor Code concerns the establishment of alternative timeframes for the payment of the average salary for the vacation period. The Ministry reported that prior to the latest amendment, under the requirements of Part 5 of Article 140 of the Code, the average salary for the vacation period had to be paid no later than three days before the start of the vacation. However, in practice, in some cases employers were unable to comply with this requirement, and as a result, there was a risk of administrative liability for violating legal requirements by failing to pay vacation pay three days in advance. The latest amendment has created a new possibility for paying vacation pay at other times. However, in this case, two main conditions must be met:
a) the payment of vacation pay at another time must be explicitly stipulated in the employment contract or collective agreement;
b) this time must not be later than the day on which the next salary payment (advance or remaining portion) is made.
Regarding the retention of the average salary, it was noted that in cases specified in the Labor Code, the employee does not actually perform their labor function. However, payment of wages for those days is mandatory. In such cases, the average salary is retained. The procedure for calculating the average salary is regulated by Article 140 of the Code during labor leave, and by Article 177 of the Code in all other cases.
The Ministry’s statement also notes that the retention of the average salary applies when an employee is on leave (labor, educational, or creative), as well as in the cases listed in Article 179 of the Code (for example, when summoned to inquiry, preliminary investigation, and court authorities as a witness, victim, expert, specialist, interpreter, or attesting witness; when participating in court proceedings for the resolution of individual labor disputes; when sent by the employer to additional educational institutions with full or partial release from work; when sent on a business trip to another region or abroad; when sent outside the workplace due to the need to protect the interests and lawful rights of the owner and to represent the employer at relevant events; when donor employees undergo medical examinations and on the days they donate blood and blood components, as well as during the time employees remain in medical institutions for medical examinations, etc.).