Vacation pay is a legally guaranteed right of every employee, and its correct calculation is important for both employees and employers. This article provides practical information on how vacation pay is calculated, the formula used, determination of average salary, and the most common mistakes.
Legal basis for vacation pay calculation
The payment of wages during vacation is regulated by Article 140 of the Labor Code of the Republic of Azerbaijan. According to this article, the amount paid for the vacation period is determined based on the employee’s average salary.
For which period is the average salary calculated?
The average salary is calculated based on the employee’s income for the 12 calendar months preceding the month in which the vacation is granted.
- Employees who have worked for 12 full months: the total salary for 12 months is summed and divided by 12.
- Employees who have worked less than 12 months: the calculation is based on the actual full calendar months worked.
Legal note: if an employee has not received a salary for certain reasons (e.g., parental leave), the calculation may require a different legal approach.
Payments included and excluded from calculation
All regular payments received by the employee are taken into account when calculating vacation pay.
Included payments:
- Basic salary (official wage / tariff rate);
- Overtime payments;
- Allowances for working conditions (hazardous, heavy work, etc.);
- Regular bonuses and supplements.
Payments not included in calculation
The following payments are excluded:
- Social payments (one-time benefits, one-time bonuses, financial aid);
- Compensation payments provided under Article 179 of the Labor Code.
Recommendation: incorrect differentiation of these payments is one of the main causes of labor disputes.
How is the average salary calculated?
The basis for vacation pay calculation is the average salary determined from all payments made over the last 12 calendar months.
Formula for calculating average daily salary
Average daily salary = Total amount paid in the last 12 months / 12 / 30.4
30.4 represents the average number of calendar days in a month.
How is the number of vacation days determined?
The duration of annual leave depends on the employee’s field of work:
- Standard employees — 21 days
- Civil servants — 30 days
- Employees working under special conditions — 30–42 days
- Additional days for employees with extensive work experience
How is vacation pay calculated? (Step by step)
- Determine the average monthly salary (sum all official salaries paid over 12 months);
- Calculate the average daily salary using the formula above;
- Multiply the average daily salary by the number of vacation days.
Example of vacation pay calculation
- Total salary paid over 12 months: 12,000 AZN
- Average daily salary: 12,000 / 12 / 30.4 ≈ 32.89 AZN
- Vacation days: 21 days
Vacation pay = 32.89 × 21 = 690.69 AZN
Most common mistakes
- Incorrect inclusion of bonuses and incentives
- Confusion between social leave and annual leave
- Misinterpretation of vacation rights during probation period
- Failure to consider special terms in individual employment contracts
When is legal assistance needed?
Professional legal assistance is recommended if:
- Vacation pay is calculated incorrectly
- The employer does not grant vacation
- Payment is delayed
- A labor dispute arises