Paid leave entitlement is a fundamental right. Established in 1853 by Napoleon, initially only for civil servants, it was not until 1936 that this right was extended to all employees. Between accrual periods and usage periods, the management of paid leave and its balance is an important and recurring subject within companies. Follow our article for some explanations.
What is paid leave?
According to Article L3141-1 of the Labor Code: “every employee is entitled each year to paid leave at the employer’s expense.” This is a period of authorized absence, paid by the employer.
You are entitled to paid leave regardless of your employment contract (permanent contract, fixed-term contract, or temporary contract), whether you work full-time or part-time, from the 1st day of employment.
What is the accrual period?
Accrual occurs during a so-called reference period which, if no company, establishment, or industry agreement has been defined, runs from June 1st of year N to May 31 of year N+1.
Taking 2024 as an example, we accrued leave from June 1st, 2023 to May 31, 2024.
This accrual occurs during a period of actual work that one has either during probation or notice period performed, whether paid or unpaid. This accrual period is sometimes different depending on the company, but the accrual method does not change.
Why do we speak of actual work period?
This is a period during which work is provided. These periods are listed by the Labor Code and recently, sick leave absences are considered as such.
See our article from earlier this year regarding accrual during sick leave periods: click here
We can thus exclude strike periods, full-time parental leave or parental presence, family solidarity leave, suspension periods, sabbatical leave, or unpaid leave.
At the end of this accrual period, what is the acquired entitlement?
Article L3141-3 of the Labor Code states an entitlement of 2.5 working days per month of actual work capped at 30 days per year with the same employer—i.e., 5 weeks of paid leave per year, whether the employee works full-time or part-time.
The Labor Code does not authorize accrual based on working time. At the end of the reference period, the accrual is then rounded up to the next whole number if the number obtained is not whole. This situation occurs particularly in case of mid-year entry.
Accrual occurs per period of 4 weeks worked or 24 working days reduced by the number of days of absence not considered as actual working time. It is accepted that this accrual be done on the basis of 2.08 business days per month if the employee is not disadvantaged in their accrual.
This accrual may be increased according to company practices, by:
- split leave
- leave for dependent children
- leave for young parents
- certain other additional leave arising notably from collective agreements, accords, employment contracts, or practices.
To all this is added the new accrual of paid leave during sick leave on the basis of 2 working days per 4 weeks or 1.66 business days.
These entitlements must be accessible so that each employee is able to consult their accrual, usage, and balance.
Some companies choose to set up separate entitlement counters. Others have opted for a single counter.
When can they be used?
From the 1st day of employment —even though this has not always been the case in the past— within the limit of one’s accrual.
Indeed, Article L3141-12 provides that: “Leave may be taken from the time of hiring, without prejudice to the rules for determining the leave-taking period and the order of departures and the rules for splitting leave established under the conditions provided in this section.”
Article L3141-13 continues: “Leave is taken during a period that in all cases includes the period from May 1 to October 31 of each year.”
Usage is therefore done either in working days (Monday-Saturday) or in business days (Monday-Friday) and the deduction is made on the basis of the number of working days or business days included in the chosen absence period.
It begins on the 1st working day when the employee should have worked and ends on the last working day when the employee should have worked.
If during this period there are public holidays not worked in the company, there is no deduction of leave days for those days.
What happens in case of a balance at the end of the reference period?
No carryover is possible without employer authorization.
There are situations that allow it such as: commuting accident, workplace accident, occupational illness) or related to leave (maternity, adoption, parental education leave, etc.).
And recently, following a work stoppage related to illness, (See our dedicated article for carryover possibilities for leave related to a work stoppage due to illness)
As of the publication date, we are reaching the end of this reference period, so the challenge for companies is to ensure that each employee has indeed taken their expired leave balance, while avoiding disruption to their various departments.
In this month of May 2024, even more than previous ones, due to the recent modifications to the accrual rules mentioned above.
What compensation?
When taking leave, the employee is compensated. This compensation is equal to one-tenth of the total remuneration received by the employee during the reference period.
The law provides for 2 calculation methods:
- The so-called one-tenth method
- The so-called maintenance method
The employer is required to compare the 2 methods in order to compensate the employee fairly, at each leave-taking or at the end of the period.
In principle, this comparison should be made at each leave-taking, but it is accepted to use the salary maintenance method at each leave-taking, and to make the comparison with the one-tenth method only at the end of the reference period based on the remaining balance and pay additional compensation if necessary.
To calculate this compensation, the reference salary must first be determined.
What is the reference salary to be used for calculating this compensation?
The amounts must represent the compensation for the employee’s work.
The base salary is one of the first elements taken into account in the calculation.
To which will be added various bonuses, overtime hours, benefits in kind while excluding certain gross elements such as the payment of allowances, bonuses considered exceptional or not related to the employee’s work, certain benefits in kind, substitute income, etc.
It is important to be able to regularly, for example each year, verify the basis used for these two methods and at a minimum, to verify when creating a new payroll item, the desired treatment for the one-tenth basis.
What provision?
An accounting provision is a management act.
It is made to anticipate and provision the costs associated with employees’ paid leave in a company.
The provision is built each month based on the entitlements accrued by the employee and based on the salary received by the employee. It also evolves based on the leave taken over time by the employee, and ideally includes these two counters separately, as well as the associated social charges.
To these provisions may be added those for paid leave to which an employee may be entitled during sick leave, as the law of April 22, 2024 provides.
If you have questions or needs, do not hesitate to contact us.
