As a responsible employee, the issue of vacation provisions can make you sweat at the end of the year. Because: Juggling legal regulations, individual employee requirements and the desire for efficient, precise bookkeeping steals one thing in particular: time! In this blog article, we dive deep into the world of vacation provisions and focus specifically on the needs of financial staff.
Definition: What does vacation accrual mean?
The term vacation provision is a preventive measure in which unused vacation days within a financial year (remaining vacation) are recorded and shown on your annual balance sheet up to the balance sheet date.
If it happens that your employees have not used up their full annual vacation entitlement in the current financial year but want to transfer it to the following year, you will incur a settlement backlog.
If your employees have not yet submitted — i.e. planned — their remaining vacation for the new year, this is a so-called “uncertain commitment.” This in turn is subject to Restitution obligation in accordance with Section 249 HGB and requires the creation of vacation provisions.
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Calculating vacation provisions: 3 methods at a glance
The larger your company, the more complex it is to calculate vacation provisions for each individual employee. For this reason, case law allows Calculation of vacation provisions (Section 252 HGB) Either as an individual calculation or as an average calculation. When calculating individually, you calculate the vacation accrual for each individual employee separately.
Although this method provides precise results, it is extremely labor-intensive and time-consuming when working with a larger number of employees. In such cases, the average calculation is an alternative. Here, all employees are viewed as a group, which significantly reduces the workload. However, care should be taken when faced with highly fluctuating wage structures, as there is a risk of over- or undervaluation!
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Once chosen, the method for calculating vacation provisions must be retained in subsequent years! A change is only possible in exceptional cases.
Individual calculation of vacation provisions — complex but precise
With the individual calculation, you enter the hourly wage and the Working time model Every single employee. Vacation days that your employees have not taken are converted into working hours based on the working time model.
These working hours are then valued at the gross hourly wage of the respective employee. In addition, your employer shares are added to social security. In this way, you can assign a monetary value — the relevant vacation pay — to each provision. The individual calculation is therefore very precise, but also very complex. Due to the large amount of administrative work, this method is more suitable for companies with a manageable number of employees.
Practical example: Individual calculation of vacation provisions
According to her employment contract, Klara Schneider receives an annual gross of 40,000 euros. In addition, your employer pays a Christmas bonus of 2,500 euros. The employer's contribution to social security and other non-wage costs are also added to calculate the relevant vacation pay. The following calculation results in:
Annual large: 40,000 euros
+ Christmas bonus: 2,500 euros
+ Employer social security contribution: 5,500 euros
= 48,000 euros relevant vacation pay
Ms. Schneider is employed full time by her employer and works five days a week. If you subtract public holidays, the result is 248 actual working days worked per year. Ms. Schneider still has six days remaining vacation. These results in the following calculation for the individual vacation provision:
Significant vacation pay: 48,000 euros
/Actual working days: 248
* Remaining vacation days: 6
= 1,161 euros reserve amount
The passive vacation provision — i.e. the provision amount — for Ms. Schneider would amount to 1,161 euros. The employer's financial department is required to report this accrual amount in the tax balance sheet.
Average calculation — less effort, less precision
Allkoenner GmbH has four employees and does not want to carry out an individual calculation of the vacation accrual for each individual employee. In order to calculate the relevant vacation pay, the finance department must add up the annual gross wages, Christmas bonus and employer social security contributions for all employees. These results in the following calculation:
Gross salaries: 270,000 euros
+ Christmas bonus: 25,000 euros
+ Employer social security contribution: 28,000 euros
= 323,000 euros significant pay for the entire team
In order to obtain the actual annual working days of the four employees, the finance department of Allkönner GmbH multiplies the working days per week by 52 minus public holidays per year, these results in a value of 996 actual working days.
Practical example: Average calculation of vacation provisions for 4 employees
Significant vacation pay: 323,000 euros
/Actual working days: 996
* Remaining vacation days: 24
= 7,783 euros reserve amount
The Finance Department of Allkönner GmbH shows the amount of 7.783 euros accordingly in the tax balance sheet.
Automatic calculation of vacation accruals: ZEP as software support
I'm sure you can't see the forest anymore because of the trees, right? Depending on how big your company is, calculating the remaining vacation days and vacation accruals is more or less complex. So that you don't have to spend your valuable time making manual calculations, we have a solution that helps you calculate vacation provisions. With ZEP additional modules Overtime, absenteeism & vacation As well as Prices & receipts Save not only time, but also nerves when making financial statements.
Because: With the Prices & Receipts module (can also be booked for ZEP Compact & already included in ZEP Professional), you can set an internal hourly rate for each employee, which is used to calculate the relevant vacation pay. And thanks to the Overtime, Absenteeism & Vacation module, remaining vacation days and all public holidays for your federal state are shown exactly. Simply enter all required parameters, such as annual vacation, gross wages, etc. in the appropriate modules and you can — with the combination of both modules — complete vacation provisions individually for each employee at the push of a button.
To do this, proceed as follows in your ZEP:
Read reserve amount per employee & export as a file
As you can see, you can access the desired evaluation with just a few clicks, select the accrual period individually and simply export the data and easily transfer it to your annual balance sheet. Small ZEP hack: You can also have this evaluation sent to you automatically (in ZEP “Run in Background”) at a fixed frequency.
Resolve accruals for vacation: How to proceed
Provisions for vacation are released when the uncertain liability that led to their formation no longer exists. There are various methods for correctly resolving provisions. The following are the four main methods that are used depending on the situation:
1. The amount of vacation accrual corresponds to the expenses paid outThe provision corresponds to actual expenditure. There is no additional accounting adjustment, as the expenditure is correctly represented.2. Vacation accrual was larger than the payoutThe difference between the provision and actual expenses is posted as other operating income, which leads to an improvement in operating income.3. Provision for vacation was too lowThe difference between the provision and the actual expenditure is recognized as an additional expense, which leads to a worsening of the operating result.4. Reset is not requiredThe entire reserve amount is recognized as other operating income, which leads to an improvement in operating income.
Please note that employees are not simply entitled to a payment of unused vacation days. Financial compensation is only possible if the employment relationship is terminated by the employer. In addition, the claim to Remaining vacationIf it is not taken by 31 March of the following year.
Conclusion
The correct calculation and management of vacation provisions is crucial for a precise annual balance sheet. Whether through detailed individual calculation or simplified average calculation, the method should fit the size of the company.
Using ZEP can significantly simplify this process: With the modules for automated calculation and management of vacation accruals, you save time and minimize errors. Make sure that provisions are settled correctly to ensure an error-free annual balance sheet and avoid financial surprises.
