# Variable components and annual leave or holiday pay

A worker on annual leave will normally be paid leave pay as if the work were performed by him. This means that the total amount of remuneration to be paid is the same as the base salary. However, there are cases where holiday pay may be higher. This is due to the fact that, in addition to the basic salary, the employee also receives variable remuneration, which is included in the holiday pay basis. An employee receiving base salary and variable remuneration and being on vacation leave should receive remuneration for the duration of such absenteeism, taking into account the variable components. The relation between variable components and vacation leave is therefore very clear, but not always clear.

## What are variable components?

In order to calculate the holiday pay from the variable components, it should be clarified at the outset which components should be classified as variable components.

The variable component is:

• base salary specified in the hourly rate,
• remuneration for overtime work,
• regulatory bonus, sales commission,
• allowance for night work,
• functional, internship, foreman, motivational allowance,
• and the component for claim work.

## The method of calculation, i.e. the relation between variable components and a close-up vacation

We determine the vacation remuneration calculated from the variable components, taking into account all monthly variables, claim remuneration components related to the performed work in the vacation basis. We ignore non-claims components, e.g. discretionary bonuses. The components to be excluded from the leave basis are detailed in par. 6 of the leave regulation.

Par. 8 of the holiday ordinance shows us the principle of calculating holiday pay taking into account variable components, which shows that the variable components for a period not longer than one month are taken into account when determining the holiday pay in the total amount paid to the employee during the 3 calendar months preceding the month in which the leave begins. To calculate holiday pay, first analyze the total amount of variables paid in the 3 months preceding the holiday and then calculate the holiday pay.

However, it should be borne in mind that in the event of a significant fluctuation in the amount of variable monthly remuneration components, these components may be taken into account when determining the holiday pay in the total amount paid to the employee in the period not exceeding 12 calendar months prior to the commencement of the leave. Variable components for periods longer than one month (e.g. quarterly bonuses) are not included in holiday pay, even if they are of a claim nature.

## What if the variable component has not been present in the last 3 months?

If for the entire period adopted to determine the basis of the assessment, preceding the month of taking annual leave, or for a shorter period, but covering a full calendar month or full calendar months, the employee was not entitled to variable monthly remuneration, taking into account the assessment basis, the nearest months for which the employee is taken into account you were entitled to such remuneration. Which means we go back to the months when these components were paid. There is no month limit in searching backward to find months with variables.

## How do I show my holiday pay on my payroll?

If an employee receives variable monthly remuneration components in addition to the fixed salary, the base salary should be paid in full in the month of the holiday and additionally, as a separate component calculated from the variable components.

Start a free 30-day trial period with no strings attached!

Example 1.

The employee took the leave from March 13, 2020 to March 14, 2020. The variable allowance and the quality bonus are paid on the last day of the month for a given month.

The employee worked, respectively:
December - 160 hours, January - 168 hours, February - 160 hours
In March, the employee was on holiday for 16 hours.
The 3-month variable employee allowance amounts to:
2016.00 (December) + 2016.00 (January) + 1920.00 (February) = 5952.00
Quality bonus - 300 (December (+ 520 (January) + 150 (February) = 970.00
Total 5,952.00 + 970.00 = 6,922.00
Number of hours worked - 160 (December) + 168 (January) + 160 (February) = 488 hours
Then we divide the sum of the variable claim components by the number of hours during which the employee performed work in the period for which the base was determined.
6922.00 / 488 hours = PLN 14.18 x 16 hours of leave = PLN 226.88 remuneration for 16 hours calculated from the variables.
In such a situation, the employee's holiday pay is PLN 226.88.

Example 2.

What if the employee, in the calculation such as the above, finally gets an amount to be paid below the national minimum, i.e. in 2020, e.g. PLN 2600.00 gross and will be compensated for the minimum wage? Will this compensation be included in the holiday pay basis?

In accordance with par. 6 (7a) of the Holiday Regulation, the compensation to the minimum wage is not included in the basis for calculating the holiday remuneration.

Example 3.

Does the remuneration for overtime and allowances for exceeding the daily and average weekly standards are included in the basis for calculating the holiday pay in the case of a one-month settlement period and in the case of a three-month settlement period?

In the case of one-month pay periods, both the overtime pay and the supplement are included in the holiday pay calculation basis. In the case of three-month settlement periods, only the remuneration paid at the end of the month for daily exceedances is included in the holiday base. The allowance for exceeding the average weekly standards is not included in the holiday pay base, as it is a component paid for periods longer than monthly.