How to calculate salary for untaken leave days of employees, personal income tax rate for untaken annual leave, salary payment regulations… according to the 2019 Labor Code.
I. What are employees’ days off and annual leave?
Annual leave or vacation is one of the benefits that employees enjoy during 1 year of working at an organization/enterprise.
Pursuant to Articles 113 and 114 of the 2019 Labor Code, annual leave is regulated as follows:
- Employees who work 12 months in a year are entitled to the following number of days of paid leave according to their labor contract:
- 12 days of leave for employees working under normal conditions;
- 14 days of leave for underage workers, people with disabilities, people doing toxic, dangerous, or arduous work;
- 16 days off for people doing toxic, dangerous, or arduous work.
- For employees who work less than 12 months in a year, the number of days off will be calculated proportionally to the number of months worked;
- Employees traveling by road, rail, or waterway and the number of days of round trip travel is more than 2 days, from the 3rd day onwards, the travel time will be calculated in addition to the annual leave and will only be counted for 1 leave per year;
- For every 5 years of work for an organization/enterprise, the number of vacation days will be increased by 1 day.
II. Salary for unused leave days of employees
1. How to calculate salary for unused leave of employees
2. Regulations on payment of salary for employees’ unused leave days
➤ According to Clause 1, Article 48 of Labor Code No. 45/2019/QH14 for employees who have quit their jobs (resigned or lost their jobs), it is stipulated that:
Within 14 working days from the date of termination of the labor contract, both parties must fully pay all amounts related to the rights of each party, except in the following cases which may be extended but not more than 30 days:
- Due to natural disasters, fires, dangerous epidemics;
- Employers change structure and technology;
- The employer is not an individual in dissolution;
- Division, separation, consolidation, merger, sale, lease, conversion of business type, transfer of ownership and right to use business assets.
➤ For employees who are still working, Article 113 of the 2019 Labor Code only stipulates the payment of wages for untaken annual leave days of employees who quit or lose their jobs. Therefore, employees who are still working at the company will not be paid for untaken leave days.
3. Deductible expenses when calculating corporate income tax on the salary portion of employees’ unused leave days
Pursuant to Article 4 of Circular No. 96/2015/TT/BTC, Clause 2, Article 3 of Circular 25/2018/TT-BTC and Article 113 of Labor Code No. 45/2019/QH14:
- For employees who quit or lose their jobs, the salary paid for untaken annual leave days is in accordance with regulations and this expense is included in deductible expenses when determining corporate income tax;
- For employees who are still working at the company, the salary paid for unused annual leave days is not included in deductible expenses when determining corporate income tax.
However, according to Clause 1, Article 4 of the Labor Code No. 45/2019/QH14, if the employer agrees to pay salary for unused annual leave days for employees still working at the company in a way that is beneficial to the employee, it is encouraged and stipulated in the labor contract, collective labor agreement, financial regulations, etc., then it will be included in deductible expenses when determining corporate income tax (Official Dispatch 514/ATLĐ-CSBHLĐ dated October 22, 2021 of the Department of Labor Safety, Ministry of Labor – Invalids and Social Affairs responding to enterprises).
4. How to account for expenses incurred from salary for unused leave days of employees
➤ Case 1: This case of pre-deducting leave salary is for manufacturing companies. Every month, based on the plan, the accountant will pre-deduct leave salary for production workers:
Debit account 622 – Direct labor costs (according to Circular 200/2014/TT-BTC);
Debit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BTC);
Credit account 335 – Pre-deducted leave salary.
When calculating the actual leave pay payable to employees:
- If the amount payable is greater than the amount deducted:
Debit account 622 – Direct labor costs (according to Circular 200/2014/TT-BTC);
Debit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BTC);
Debit account 335 – Pre-deducted amount;
Credit account 334 – Total leave salary payable.
- If the amount payable is less than the amount deducted:
Debit account 335 – Amount deducted in advance;
Credit account 334 – Total leave salary payable;
Credit account 622 – Direct labor costs (according to Circular 200/2014/TT-BTC);
Credit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BTC).
➤ Case 2: At the end of the year, the accountant calculates the actual number of days of leave not taken by the employee and calculates the leave salary to be paid to the employee:
Debit account 622, 623, 627, 641, 642 – Total actual leave salary payable (according to Circular 200/2014/TT-BTC);
Debit account 154, 642 – Total actual leave salary payable (according to Circular 133/2016/TT-BTC);
Credit account 334 – Total leave salary payable.
5. Personal income tax on salary for unused leave days of employees
During the period, when paying monthly salary and salary for unused leave, if any employee incurs personal income tax, the accountant will determine the amount of personal income tax to be deducted and deducted from the salary payable to the employee:
Debit account 334 – Amount of personal income tax deducted;
Credit account 3335 – Personal income tax deduction amount.
Pay personal income tax on behalf of employees:
Debit account 3335 – Personal income tax payable;
Credit account 111, 112 – Personal income tax payable.
How to calculate personal income tax, based on Circular 111/2013/TT-BTC, Circular 92/2015/TT-BTC:
➤ For employees who are still working at the enterprise, income from wages and salaries and wages for unused leave days is applied according to the progressive schedule, calculated as follows:
- Personal income tax payable = Taxable income x Tax rate;
- Taxable income = Taxable income – Deductions;
- Taxable income = Total income – Tax exemptions.
Personal income tax rate table (according to progressive schedule):
➤ For employees who have quit their jobs:
- If the enterprise pays the employee before terminating the labor contract, the enterprise shall aggregate the income from salaries and wages arising during the period with the salary for untaken leave days to deduct according to the progressive schedule;
- If the enterprise pays salary for untaken leave days after the termination of the labor contract, the payment to the employee is from 2,000,000 VND or more, the enterprise shall deduct personal income tax at the rate of 10% upon payment.
6. Illustrative example
In 2021, Ms. N worked for Company X from February 1, 2021 to November 30, 2021, as a sales staff, working 26 days per month, and took 4 days off during the year. The salary for the unused days off will be paid by the company together with the salary for November 2021.
- Basic salary: 7,000,000 VND/month;
- Meal: 700,000 VND;
- Phone: 1,000,000 VND;
- Gasoline: 1,000,000 VND;
- Sales bonus: 3,000,000 VND.
⟹ Total: 12,700,000 VND.
So:
- Number of days off in a year for Ms. N = (12 days off / 12) x 10 months = 10 days;
- Number of days of leave not taken in the year of Ms. N = 10 days – 4 days = 6 days;
- Ms. N’s salary for unused leave = 7,000,000 / 26 days x 6 days = 1,615,385 VND;
- Taxable income = 12,700,000 + 1,615,385 – 700,000 = 13,615,385 VND;
- Taxable income = 13,615,385 – 11,000,000 – (7,000,000 x 10.5%) = 1,880,385 VND;
- Personal income tax = 1,880,385 x 5% = 94,019 VND;
- The company calculates leave salary into company expenses:
- Debit account 642: 1,615,385 VND;
- Credit account 334: 1,615,385 VND.
- The company deducted personal income tax from Ms. N:
- Debit account 334: 94,019 VND;
- Credit account 3335: 94,019 VND.
- Company Pays Personal Income Tax on behalf of Ms. N:
- Debit account 3335: 94,019 VND;
- Credit account 111: 94,019 VND.
III. Frequently asked questions about calculating unused annual leave
1. Are employees who have worked less than 12 months entitled to annual leave?
According to Clause 3, Article 113 of the 2019 Labor Code, employees who have worked less than 12 months in a year will have their annual leave days calculated in proportion to the number of months worked. Therefore, employees who have worked less than 12 months are still entitled to annual leave.
2. Will employees who have not taken all their annual leave be paid for the days not taken?
Depending on each company’s regulations regarding annual leave, there are usually 2 cases:
- In case the company stipulates that it will not pay salary for untaken leave days but will accumulate the untaken leave days to the following year, the employee will not be paid salary for the untaken leave days;
- In case the company stipulates that it will pay salary for unused leave days to employees, the employees will be paid this salary.
3. When an employee quits, will he/she be paid for unused leave days?
Clause 3, Article 113 of the 2019 Labor Code stipulates that in case an employee quits his/her job but has not taken all of his/her annual leave, the employee will be paid for the days not taken.