Insights

The word “idle time” is a very common term these days. Accountants and ordinary employees are uncertain about how the unused leave allowance should be calculated in the event of redundancy. Compensation for unused leave is calculated in accordance with the provisions for calculating the average wage (AW). The purpose of this article is to draw attention to rarer cases.

The average salary is calculated[1] in accordance with the legal regulations - the Description of the Procedure for Calculating the Average Wage[2]. Often, even the accountant has a question: how to calculate compensation for unused leave in the event of dismissal if, say, the employee did not work during the idle time.

Normally, compensation for unused leave is calculated from the average of the last three months of employment. If the last working day worked coincides with the last working day of that month according to the employee’s work (shift) schedule, then this month is also included in the calculations.

Compensation may be expressed as a fraction:

The daily average in this example is € 50. It is multiplied by the number of unused leave days and thus we have compensation for the unused leave.

Attention should be paid to these aspects:

1. The amount of money received within three months is not always included in the calculation of AW:
   1. Only the amount of money related to the work performed is included.
   2. If the money was received not for work, but for example, for idle time or for the first two days of illness (reimbursed from the employer’s funds) - such money are not included in the calculation of AW.

• Special attention should be paid to the exclusion of bonuses (one-time, incentive type), which are awarded in accordance with Item 6, Paragraph 2, Article 139 of the Labor Code of the Republic of Lithuania: “bonus payments allocated on the initiative of the employer to motivate an employee for work well done or for the activities or performance results of the employee or of the enterprise, department or group of employees”.

2. The days (hours) in the denominator are also related only to the time worked.
3. Many ask a simple question: how to calculate AW if an employee has been in idle time for, say, three months or more?
   1. The answer is provided in the letter received from SLI - AW in case of idle time is calculated from the remuneration agreed in the contract. This means that the employment contract is the basis. If the employment contract stipulates that the salary is at least MMS (minimum monthly salary) and the rest of the salary consists of bonuses, then the minimum salary and not the de facto higher salary before idle time would be the basis for calculating AW in case of dismissal.

Other questions that have been frequently raised in recent years due to quarantine are whether the employee’s length of service is taken into account during idle time and whether the period of idle time should be included in the calculation of compensation for unused leave. According to the explanations of the SLI, the answers to these questions are in the affirmative.

In the attachments:

1. Inquiry made by UAB Raimda auditas to SLI on 7 December 2020.
2. Response to the inquiry received from SLI on 6 January 2021.

[1] Government Resolution No. 496 of 21 June 2017 On the Implementation of the Labor Code of the Republic of Lithuania (current wording from 6 October 2020)
[2] Description of the Procedure for Calculating the Average Wage, approved by Resolution No. 496 of the Government of the Republic of Lithuania