Can vacation be replaced by a cash benefit under labour law?

Client’s Question:

“We have employees who have accrued vacation time that they won’t be able to use before the end of the calendar year. Are we allowed to replace this vacation time with a monetary payment or to carry it over to the following year?”

Consultation Response:

Vacation time protects both the interests of workers and employers. Its purpose is to allow employees to rest and enjoy their free time over an extended period while still receiving their salary. Additionally, it is the employer’s responsibility to ensure that employees take their vacation due to the duty of assistance they have (Article 328 CO).

According to Article 329d CO, replacing vacation time with a monetary payment is prohibited as long as the employment relationship continues. This provision is mandatory, and no alternative arrangements can be made (Article 361 CO).

However, case law has outlined exceptions. Monetary compensation for vacation time is possible only in the following cases:

1. Irregular Part-Time Position: A written employment contract must be in place, and salary statements must specify the portion of the total salary that compensates for vacation time.
   

2. Employee Did Not Use Vacation Time Upon Termination: It is necessary to check the duration of the notice period and the remaining vacation balance. During the notice period, the employer can ask the employee to take their vacation to some extent. The employer must ensure that the employee has an adequate notice period and that this period is not disproportionately offset by vacation time. In cases of disproportion, the vacation must be compensated with a monetary payment and cannot be deducted from the notice period.
   

3. Short-Term Contract
   

Regarding carrying over vacation time to the next year, the employer is required to ensure that employees take their vacation. If there is a balance remaining at the end of the year, it must be carried over to the following year.

Vacation rights are subject to a 5-year limitation period, which applies separately to each year of service. Thus, the only limit on accumulating vacation time from one year to the next is the five-year limitation period according to Article 128 para. 3 CO.

Consultants at the Valentin Legal Consultation are available to assist with any questions related to employment law.