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Calculation of compensation for unused leave: IMPORTANT POINT
Calculation of compensation for unused leave: IMPORTANT POINT
After the latest amendments to the Labor Code, one of the issues that has attracted employees’ attention is whether the new requirements set out in Articles 140 and 111 of the Labor Code are taken into account when calculating compensation for unused leave. Are the new requirements of Article 111 considered when calculating compensation for unused leave? Should the amount paid during compensation be no less than the employee’s last salary?
According to paragraph 1 of Article 111 of the Labor Code, during the period of leave, the employee’s workplace, position (profession), and in cases предусмотренных by the Code, the average salary—provided it is not less than the employee’s last salary—are preserved. At the same time, termination of the employment contract at the initiative of the employer and disciplinary action against the employee are not allowed during this period. This period is included in the employee’s work experience as well as in their professional experience. Expert Altay Jafarov provides clarification on these issues.
Paragraph 1 of Article 140 of the Labor Code states that the average salary paid for the period of leave is determined based on the average salary for the 12 calendar months preceding the month in which the leave is granted, regardless of the work year for which the leave is provided. When calculating the average salary for leave, months during which the employee was on partially paid social leave, unpaid leave not at the employee’s initiative, or did not work fully due to downtime not caused by the employee are replaced with the nearest fully worked calendar months. According to paragraph 2 of Article 140, if the employee has been in employment for less than 12 calendar months, their average monthly salary is calculated based on the fully worked months.
Paragraph 4 of this article states that the rules for calculating wages for the payment of leave pay also apply when paying compensation for unused leave.
This provision makes it clear that when compensation for unused leave is paid, the wage calculation rules specified in this article are applied.
However, there is still some ambiguity. According to Article 111, the employee’s average salary is maintained during the leave period. At the same time, paragraph 1 of Article 140 establishes the initial mechanism for calculating the average salary during leave. Thus, the two articles are consistent: the initial step for calculating the average salary preserved under Article 111 is determined by paragraph 1 of Article 140.
In paragraph 2 of Article 140, the term “average monthly” is used instead of “average salary.” Although this term has been removed from other articles of the Code, it remains in this article. Nevertheless, paragraphs 1 and 2 of Article 140 reflect the initial steps for calculating the average salary: paragraph 1 applies when the employment period is a full 12 months, and paragraph 2 applies when it is less than 12 months.
In addition, paragraph 3 of Article 140 uses the term “salary for the leave period” instead of “average salary.” This creates an inconsistency between Articles 111 and 140. According to Article 111, only the average salary should be preserved during leave, and it must not be lower than the employee’s last salary. However, paragraph 3 of Article 140 uses the term “salary” instead. Despite this, in practice, calculations during leave are treated as based on the average salary.
- Now let us clarify the issue of compensation calculation by referring to Article 111 and paragraph 4 of Article 140:
-Article 111 applies during the employee’s leave period.
- The preservation of the average salary applies only while the employee is on leave.
- The requirement that the amount must not be lower than the last salary also applies only during the leave period.
- Paragraph 4 of Article 140 determines the procedure for calculating compensation for unused leave.
- It requires that compensation be calculated based on the provisions of paragraphs 1, 2, and 3 of the same article.
- In other words, Article 111 applies when the employee is on leave, while paragraph 4 of Article 140 applies when the leave is not used.
Thus, when compensation for unused leave is paid, calculations and payments are made, as in previous years, in accordance with Article 140 of the Labor Code. However, unlike Article 111, the amount is not required to be at least equal to the employee’s last salary.
Example: An employee of “AA” LLC went on leave in February 2026, and their average salary for the leave period was 1,120 manats. However, their salary for February amounted to 1,200 manats. Assume that the daily average wage used in the calculation was 40 manats. Before going on leave, the employee applied to receive compensation for 25 days of unused leave from previous years.
In this case, since the average salary for the leave period (1,120 manats) is lower than the February salary (1,200 manats), the leave payment will be made at the level of the last salary, i.e., 1,200 manats.
At the same time, the compensation for 25 days of unused leave is calculated as:
40 × 25 = 1,000 manats.
It is clear that this amount is lower than the last monthly salary.
Nevertheless, despite the compensation amount being lower than the February salary, the payment will be made in the amount of 1,000 manats, because the requirements of Article 111 of the Labor Code do not apply when calculating compensation.
After the latest amendments to the Labor Code, one of the issues that has attracted employees’ attention is whether the new requirements set out in Articles 140 and 111 of the Labor Code are taken into account when calculating compensation for unused leave. Are the new requirements of Article 111 considered when calculating compensation for unused leave? Should the amount paid during compensation be no less than the employee’s last salary?
According to paragraph 1 of Article 111 of the Labor Code, during the period of leave, the employee’s workplace, position (profession), and in cases предусмотренных by the Code, the average salary—provided it is not less than the employee’s last salary—are preserved. At the same time, termination of the employment contract at the initiative of the employer and disciplinary action against the employee are not allowed during this period. This period is included in the employee’s work experience as well as in their professional experience. Expert Altay Jafarov provides clarification on these issues.
Paragraph 1 of Article 140 of the Labor Code states that the average salary paid for the period of leave is determined based on the average salary for the 12 calendar months preceding the month in which the leave is granted, regardless of the work year for which the leave is provided. When calculating the average salary for leave, months during which the employee was on partially paid social leave, unpaid leave not at the employee’s initiative, or did not work fully due to downtime not caused by the employee are replaced with the nearest fully worked calendar months. According to paragraph 2 of Article 140, if the employee has been in employment for less than 12 calendar months, their average monthly salary is calculated based on the fully worked months.
Paragraph 4 of this article states that the rules for calculating wages for the payment of leave pay also apply when paying compensation for unused leave.
This provision makes it clear that when compensation for unused leave is paid, the wage calculation rules specified in this article are applied.
However, there is still some ambiguity. According to Article 111, the employee’s average salary is maintained during the leave period. At the same time, paragraph 1 of Article 140 establishes the initial mechanism for calculating the average salary during leave. Thus, the two articles are consistent: the initial step for calculating the average salary preserved under Article 111 is determined by paragraph 1 of Article 140.
In paragraph 2 of Article 140, the term “average monthly” is used instead of “average salary.” Although this term has been removed from other articles of the Code, it remains in this article. Nevertheless, paragraphs 1 and 2 of Article 140 reflect the initial steps for calculating the average salary: paragraph 1 applies when the employment period is a full 12 months, and paragraph 2 applies when it is less than 12 months.
In addition, paragraph 3 of Article 140 uses the term “salary for the leave period” instead of “average salary.” This creates an inconsistency between Articles 111 and 140. According to Article 111, only the average salary should be preserved during leave, and it must not be lower than the employee’s last salary. However, paragraph 3 of Article 140 uses the term “salary” instead. Despite this, in practice, calculations during leave are treated as based on the average salary.
- Now let us clarify the issue of compensation calculation by referring to Article 111 and paragraph 4 of Article 140:
-Article 111 applies during the employee’s leave period.
- The preservation of the average salary applies only while the employee is on leave.
- The requirement that the amount must not be lower than the last salary also applies only during the leave period.
- Paragraph 4 of Article 140 determines the procedure for calculating compensation for unused leave.
- It requires that compensation be calculated based on the provisions of paragraphs 1, 2, and 3 of the same article.
- In other words, Article 111 applies when the employee is on leave, while paragraph 4 of Article 140 applies when the leave is not used.
Thus, when compensation for unused leave is paid, calculations and payments are made, as in previous years, in accordance with Article 140 of the Labor Code. However, unlike Article 111, the amount is not required to be at least equal to the employee’s last salary.
Example: An employee of “AA” LLC went on leave in February 2026, and their average salary for the leave period was 1,120 manats. However, their salary for February amounted to 1,200 manats. Assume that the daily average wage used in the calculation was 40 manats. Before going on leave, the employee applied to receive compensation for 25 days of unused leave from previous years.
In this case, since the average salary for the leave period (1,120 manats) is lower than the February salary (1,200 manats), the leave payment will be made at the level of the last salary, i.e., 1,200 manats.
At the same time, the compensation for 25 days of unused leave is calculated as:
40 × 25 = 1,000 manats.
It is clear that this amount is lower than the last monthly salary.
Nevertheless, despite the compensation amount being lower than the February salary, the payment will be made in the amount of 1,000 manats, because the requirements of Article 111 of the Labor Code do not apply when calculating compensation.