With the arrival of the summer months, planning vacations becomes a relevant topic for employers and workers. One of the critical questions that arises is the right to receive a vacation bonus payment. The vacation bonus is a material right of employees that can significantly ease the financial costs associated with vacations. This blog will explain the vacation bonus, who is entitled to receive it, and the legal and tax provisions related to this type of compensation.
What is a holiday allowance, and how is the right to payment acquired?
Employees can realize a holiday allowance or a material right based on the employer’s acts, such as an employment contract, work regulations, or a collective agreement. If any source of labour law does not define the right to a holiday allowance, the employer can decide to pay the allowance. The holiday allowance can be paid either tax-free or taxable, and starting from 2024, employers can pay up to 700.00 euros annually as a holiday bonus to employees.
Right to Holiday Allowance Payment
All workers, whether employed on a fixed-term or permanent basis, have the right to a holiday allowance. Suppose a collective agreement, work regulations, or an employment contract does not establish this right. In that case, the employer can decide to pay the allowance. This decision should define the holiday allowance payment’s criteria, method, and amount.
Non-Taxable Amount of Holiday Allowance
According to the Income Tax Regulations, occasional bonuses such as holiday allowances, Christmas, and Easter bonuses are non-taxable, up to 700.00 euros annually. If the paid amount exceeds this limit, the difference is considered income and is subject to taxation.
Conditions for Non-Taxable Holiday Allowance Payment
To ensure the holiday allowance is non-taxable, employers must meet the following conditions:
- Pay the holiday allowance to an employee with an established employment relationship.
- Ensure the paid amount is at most 700.00 euros annually, considering that the employee has not received other occasional bonuses that, combined with the holiday allowance, would exceed this amount.
Employees not employed for the entire year are entitled to a proportional part of the holiday allowance. Employers should also note that employees on maternity, parental, or sick leave cannot receive the holiday allowance, as they do not use annual leave during these periods.
Right to Holiday Allowance When Working for Multiple Employers
Suppose an employee works for multiple employers during the same year. In that case, they must provide a written statement to their employer about any payments received from other employers before receiving the holiday allowance. The employer can verify the non-taxable status of the payment through the ePorezna system.
Enforcement and Holiday Allowance
Employers can pay the holiday allowance in a protected employee account or cash. Up to 700.00 euros annually is exempt from enforcement if paid into a protected account.
Conclusion
Proper management of holiday allowance payments is crucial for employee satisfaction and maintaining a positive work atmosphere. Employers should know the legal framework and ensure that payments comply with regulations. For any additional information or advice regarding holiday allowance payments and other financial and accounting topics, please get in touch with our team at Confida Croatia.
Contact Us
For additional information on the rights of employees and employers, contact our team of experts at Confida Croatia. We aim to ensure that your business processes comply with the law and that your employees are satisfied and motivated.
