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Annual Leave Entitlement and Wages Calculation for Employees in Serbia: The Ultimate Guide

Apr 10, 2023

HBL > News > Article > Annual Leave Entitlement and Wages Calculation for Employees in Serbia: The Ultimate Guide

According to the Constitution of the Republic of Serbia and the Labor Law, employees are entitled to annual leave during the calendar year and can calculate wages during this time.

They are also eligible for compensation for unused annual leave. However, to exercise this right, specific conditions must be met.

Here are the details regarding the duration, amount of compensation, and other issues related to acquiring this right.


When is an Employee Entitled to Annual Leave?


Employees with the right to annual leave can choose between using their full leave duration or a proportional number of days. However, it is important to note that employees must first acquire the right to use their annual leave.

The right to use annual leave is typically granted after one month of uninterrupted work starting from the day of employment. This applies to employees who establish an employment relationship with their employer in the current calendar year and intend to use their annual leave.

Employees who established an employment relationship in a previous year and have not yet used their annual leave can use it at the beginning of the current calendar year. Whether or not they choose to use it will depend on their agreement with the employer.

When it comes to annual leave, employees have the option to use it in its entirety or proportionally, depending on their situation. It’s important to differentiate between the two:

  • Total annual leave can be used by employees who have had a working relationship with their employer in the previous or one of the preceding calendar years, as long as their employment doesn’t terminate in the current calendar year.
  • Professional annual leave is available to employees who establish a working relationship with their employer during the current year or whose employment relationship will terminate during the current year.


What is Continuous Work?


Continuous work, which is actually important for the right to use annual leave, besides actual work, also includes temporary incapacity for work. This refers to the following:

  • Employee sick leave – due to illness, pregnancy maintenance, work injury, and others;
  • Maternity leave, leave from work for child care and special child care;
  • Paid leave, leave in case of work interruption without employer’s fault, and similar.


Annual Leave for Unpaid Absence


Employees on unpaid leave or using the right to suspend their employment cannot claim the right to annual leave.

During the suspension of employment, the right to annual leave is also suspended. Moreover, the continuous work requirement is unmet during this period because no time is spent at work.

Therefore, the right to annual leave can be proportional to the number of months the employee has worked.


Annual Leave After Commencement or Termination of Employment in the Current Year


An employee who starts employment in the current calendar year has the right to use annual leave after one month of continuous work. The duration is calculated based on the proportional number of working days.

Furthermore, if an employee starts employment that will last until the end of the current calendar year, they can also use annual leave. After one month of continuous work, starting from the day of signing the employment contract, they can take a proportional number of days off.

The same applies to an employee whose employment is terminated during the calendar year. They have the right to a proportional number of days based on the number of months worked.

If an employee cannot use their annual leave during employment, the employer is obliged to pay compensation for the unused annual leave.


The duration of annual leave an employee is entitled to be an important consideration. According to the law, employees must be allowed to take a minimum of 20 working days of annual leave per calendar year.

The employment contract and the employer’s general act outline the specific number of days allotted for annual leave.

The employer also sets the maximum duration of annual leave and can increase the total duration for certain reasons defined in the employment contract or general act.

The employee can only increase the number of days of annual leave based on the length of their employment and certain criteria, such as:

  • Work contribution,
  • Working conditions,
  • Work experience,
  • Professional qualifications.

The employment contract or general act also outlines the specific criteria for increasing annual leave.

It’s important to note that one week of annual leave is equivalent to five working days by law, regardless of the employer’s workweek schedule or the distribution of working hours.


What is Excluded from Vacation Days & What Counts as Vacation Interruption?


Annual leave cannot include the following days by law:

  • Public holidays that are non-working days,
  • Absence days when the employee has the right to paid leave (such as marriage, childbirth of spouse, serious illness of immediate family members, etc.),
  • Absence days due to temporary inability to work up to 30 days and temporary inability to work over 30 days.

If an employee experiences any of these situations during their annual leave (e.g., marriage, childbirth of spouse), their annual leave is extended by the number of days of paid leave they are entitled to. To utilize this paid leave during their annual leave, the employee must submit a request and receive approval for its use.

Afterward, the employee’s remaining annual leave days can be used with their employer’s agreement either during the current period or in the future.

If the employee becomes ill, injured, or is temporarily unable to work for any other reason during their annual leave, their annual leave is interrupted, and sick leave is initiated.

Sick leave days do not count as annual leave, and the employee can continue to use their remaining annual leave days after their sick leave ends.

Annual leave may also be interrupted due to pregnancy maintenance leave, maternity leave, leave for child care, and leave for special child care.

The remaining annual leave days can be used after the leave ends, but no later than June 30 of the following year.


Annual Leave for Limited Employed Employees


Limited-term employees have the same rights and responsibilities as permanent employees, including the right to a proportionate amount of annual leave earned after one month of work in the calendar year when their employment commenced.

They can also use their annual leave before their contract expires and receive compensation for unused leave upon contract termination.

Furthermore, pregnant employees on maternity, child care, or special child care leave cannot be dismissed. Employers may prolong fixed-term contracts until the end of such leave, which may result in financial compensation for unused annual leave.

The financial compensation they will receive equals the average salary in the previous 12 months, proportional to the number of unused annual leave days.


Annual Leave Schedule


The employer determines the timing of annual leave according to job needs, with prior agreement with the employees. The employees can choose to use their leave all at once or in parts.

The employer must provide the decision on annual leave to the employee no later than 15 days before the start date. However, if the employee requests to use their leave, the decision can be given just before use.

For collective annual leave, the employer must make a decision that includes a list of employees using it, their organizational units, and the period of use. This decision must be posted on the notice board at least 15 days before the start of the annual leave.

The decision on the annual leave schedule can be delivered in electronic form, but if a worker requests a written form, it must be provided.

The employer can change the time and schedule for using leave if necessary for job needs, informing the employees at least five working days before the start date.


Salary  Calculation and Payment During Annual Leave


Employees have the right to calculation and payment of salary compensation during the period of annual leave.

The amount of compensation that can be obtained is equal to the average salary in the previous 12 months. The calculation of the 12-month average wage includes all earnings that have the character of salary, which were paid to the employee in the previous 12 months in relation to the month in which the annual leave is used.

Earnings that have the character of salary and which are included in the average and calculation for the payment of compensation during the use of annual leave are:

  • Paid hourly wage for effective working hours in the previous 12 months, a portion of the salary based on work performance (incentives, etc.);
  • Increased salaries paid in the previous 12 months based on work on holidays, night work, shift work, overtime work, and past work;
  • Other earnings that have the character of salary and which were paid in the previous 12 months (hot meal, vacation pay, field supplement, living allowance, and other employee benefits).

Salary compensation during annual leave is taxable, i.e., it is subject to calculation and payment of taxes and contributions for mandatory social security (it is treated as salary).

When determining the basis for calculating salary compensation, the following are taken into account in the calculation of salary during annual leave:

  • Effective working hours during the previous 12 months,
  • Calculated and paid a salary on all grounds for hours worked by the employee.


Vacation Allowance


Employees are entitled to a vacation allowance, which is also included in their salary calculation during their annual vacation.

According to the definition, the vacation allowance represents compensation for the costs of using annual leave, and employers are legally obliged to pay it to their employees.

The amount of the vacation allowance paid to employees is not legally determined. Still, employers can independently decide on the amount, which is then defined in the employment contract or general act.

In addition to the amount, the employer independently determines other issues related to the vacation allowance:

  • Payment method (whether as 1/12 with each salary payment or as a lump sum payment with the salary for a certain month),
  • Whether all employees, including those who work part-time, have the right to the same amount of allowance,
  • Whether employees who have used proportional vacation days have the same right to the allowance as those who have used the full vacation days.

The vacation allowance is considered part of the salary and is paid as a part of the salary. For this reason, taxes and social contributions are paid on the amount of the vacation allowance, just like for the salary.

The calculation and payment of the vacation allowance are usually carried out at the same time as the payment of the salary for the annual leave.

Our accounting company HLB T&M Consulting offers a wide range of services, including payroll and HR services and external calculation of vacation allowances. Contact us for more information.