Under Slovenian labour law, employers are obliged to pay their employees a so-called “regress” – holiday allowance – every year.
Holiday allowance is a one-off payment to an employee, which is historically derived from Slovenian legislation and is primarily intended as a payment to enable the employee to afford to take a holiday.
Holiday allowance and annual leave are inextricably linked. The annual holiday allowance is a sum of money which the employer is obliged to pay to the employee in addition to the annual leave under the Labour Relations Act . The annual leave is a right of the employee which cannot be waived by the employee and which the employer may not deprive the employee of.
The legal deadline for payment is 1 July each year, but as the payment is tax-free up to the national average gross salary, it is currently €2,317.82 (January salary). However, the deadline for payment of the back pay, if the company is in liquidity difficulties, is 1 November of the current year.
Below we have compiled some rules that are good to know when paying out holiday allowance. The right to holiday allowance is, as mentioned above, linked to the right to annual leave – which every worker who has a contract of employment is entitled to.
The minimum amount of the holiday allowance may also be higher than the minimum wage
Although the Employment Relations Act stipulates that an employer must pay an employee entitled to annual leave at least the minimum wage – which this year is €1,253.90 – the collective agreement governing a particular industry or sector of the economy may set a higher minimum payment.
For example, in the construction sector, this year the collective agreement sets the minimum wage at €1,410 gross. In the banking sector, the regress must be at least 80 per cent of the average wage of the previous month of employees in the country (€1,854.26 according to the latest available data). In the electricity sector, the regress is set at 70 per cent of the average wage of employees in the electricity industry in the previous three months.
If you are not bound by any collective agreement, you must pay (at least) the minimum wage.
Do all employees have to receive the same amount?
Collective agreements at company level may also lay down different rules for the payment of holiday allowance.
Tax-free holiday allowance up to the average salary
Holiday allowance is tax-free up to the full amount of the last known average salary in the country (€2,317.82 in January, according to Eurostat), i.e. no contributions or income tax are payable up to this amount. If the employer pays a holiday allowance that is higher than the average gross salary, the difference will be subject to income tax and contributions. The amount of the average monthly gross salary for the year for which income tax is payable is taken into account in determining the annual holiday allowance, which is not included in the annual taxable amount.
Who all is entitled to the annual allowance
If a worker is not employed for the whole calendar year, he or she is entitled to a pro rata share of annual leave, which means that the right to holiday allowance is also pro rata. So if a worker starts work at the beginning of April, for example, he or she is entitled to three quarters of the full amount. However, if the employment took place in the middle of the month, say in mid-March, he is entitled to a pro rata share of the holiday allowance for each completed month of employment (9/12) plus half for March.
Workers who are employed after 1 July, or after the company has already paid their holiday allowance, are also entitled to a pro rata share of the allowance. So if a worker is employed in October, for example, he or she is entitled to three-twelfths of the holiday allowance. The Employment Relations Act does not explicitly specify by when the allowance must be paid to such a worker, nor does it specify by when the allowance must be paid to a worker whose contract of employment ends before 1 July. However, it must be paid by the end of the year.
Workers who work part-time or who are on extended sick leave or maternity leave are also entitled to the allowance.
But be warned that a part-time worker who works part-time under the Pension and Disability Insurance Regulations, the Health Insurance Regulations or the Parental Leave Regulations is entitled to full holiday allowance, while a worker who works 20 hours a week by choice is paid a pro-rata (half-time) allowance. Workers who are absent on sick leave for a long period of time or who are on maternity leave for most of the year are also entitled to the full amount.
What if a worker’s employment is terminated after the recourse payment has been made?
What if the employer pays the full amount by July and the worker leaves the company in October? In this case, you can either ask the employee to repay a pro rata share of the holiday allowance, or you can choose not to ask the employee to do so.
The Tax Administration of the Republic of Slovenia has published a clarification on what happens if the worker does not return the pro-rata part of the holiday allowance – whether the employer treats the payment differently for tax purposes than a holiday allowance, and whether this is followed by a correction of the rectification of the rectification form: “There is no basis in either the Income Tax Act or the Pension and Disability Insurance Act to limit the amount of tax-free or non-contributory annual holiday allowance, which is set at 100 per cent of the average monthly salary of employees in Slovenia or, in the annual income tax assessment, at 100 per cent of the average annual salary of employees in Slovenia, calculated on a monthly basis, for the year in respect of which the income tax is levied, to be taken into account in proportion if the employee is not entitled to the full amount of the holiday allowance under the labour law.
It should also be borne in mind that the conditions for payment of the holiday were fulfilled at the time of payment and the employer could not have foreseen that the employee’s employment with that employer would be terminated at a later date after the payment of the holiday allowance. Therefore, when the employment relationship is terminated and the employee fails to repay a pro rata share of the holiday allowance, the employer is not required to amend the salary tax forms.”
What are the fines for those who break the rules?
Every year, the Labour Inspectorate finds that the highest number of reports about violation on pay for work is related to the payment of annual leave, and the highest number of violations are also found in this area.
Since 2019, the Inspectorate has also been working with the Tax Office, which provides information on employers who have not submitted a holiday allowance tax form reports for their workers. Irregularities and infringements in this area are mainly detected by the tax inspectors in the course of inspections of taxes and contributions on natural persons’ income from employment, and mainly relate to unsubmitted or late submitted tax forms, and to a lesser extent also to irregularities concerning the payment of holiday allowance in cash, which is not allowed under the Tax Procedures Act.
The Employment Relations Act provides for a fine of between three thousand and 20.000,00 EUR for non-payment (or late payment) of holiday allowance (between 1.500 and 8.000,00 EUR for a smaller employer) and between 450 and 2.000,00 EUR for the responsible person of an employer of a legal person (a legal person).
The inspector can only penalise the employer for offences already committed and can order the employer to comply with labour law rules in the future by means of a regulatory decision, but cannot enforce the repayment of claims for work related payments and holiday allowance. “Therefore, if the employee wants to obtain payment of the back pay, he must bring an action against the employer in the labour court,” the Inspectorate explained some time ago. Employment claims are time-barred within five years.