Unused Vacation Days: What Applies and How to Avoid the Risks

Please be aware that this article primarily pertains to Swedish rules and regulations, which may not necessarily apply or be valid in jurisdictions outside of Sweden.

Time off, recovery, and the chance to recharge. For most of us, vacation is something to look forward to. But sometimes, for various reasons, vacation days are not taken as planned. That can lead to consequences further down the line. What does the legislation actually say? And what do you, as an employer, need to keep track of to avoid problems? Let’s take a closer look!

What Does the Annual Leave Act Say?

If you are familiar with the Swedish Annual Leave Act, you know that all employees are entitled to 25 days of annual leave per year, regardless of whether they work full-time, part-time, or have irregular working hours. Most commonly, the holiday year runs from 1 April to 31 March the following year, but some organisations choose to align it with the calendar year instead.

Of these 25 days, at least 20 paid vacation days must be taken as time off during the holiday year, provided the days have been earned. Paid vacation days in excess of 20 may be carried forward and taken at a later date, though in most cases not for more than five years.

Failing to comply with these rules can be costly. As an employer, you are responsible for ensuring that vacation is actually taken in accordance with the law. If statutory vacation is not granted, this may be considered a violation of the Annual Leave Act, and the company may be liable to pay damages, even if the employee themselves chooses to forgo time off.

Keep in mind: The Annual Leave Act is mandatory in certain parts, but it also allows for deviations through collective bargaining agreements. This means that conditions related to, for example, the holiday year, vacation scheduling, and the saving of days may differ. Always make sure to check what applies under your company’s collective agreement.

Unused Vacation Creates a Vacation Liability

In addition to the legal aspects, there is also a financial side to consider. Unused vacation results in a vacation liability, meaning the cost associated with vacation days that have been earned but not yet taken. This includes vacation pay, vacation supplements, and employer social security contributions.

A vacation liability arises both when employees save vacation days in accordance with the rules and when vacation is postponed for other reasons. The more days that remain without a clear plan, the larger the liability becomes. This is why structured vacation planning and continuous follow-up are essential, both ahead of the holiday year-end and throughout the year.

At the same time, it is crucial to ensure that statutory vacation is actually taken. If you see that an employee risks not taking their 20 paid days during the holiday year, the next step is to act in time and plan the leave. This helps ensure compliance with the legislation while keeping the vacation liability at a reasonable level.

Vacation as Part of the Work Environment Responsibility

Recovery cannot be postponed indefinitely. Ensuring that employees take their vacation as intended is a prerequisite for well-being, and as an employer, you have an important responsibility to plan and follow up to make sure it happens.

There is also another perspective. When vacation is postponed repeatedly, it may be a warning sign of excessive workload and an unsustainable work situation. Monitoring vacation usage is therefore an important part of systematic work environment management.

Can Vacation Days Be Paid Out in Cash?

A common question related to unused vacation is whether the days can instead be paid out in cash, for example if an employee does not want, or feels unable, to take extended time off.

The short answer is no. Because rest and recovery must be safeguarded, vacation should be taken as time off and cannot, as a general rule, be exchanged for money. That said, there are a few situations where exceptions apply:

when employment ends and remaining vacation days are paid out as vacation compensation
in short-term employment, where vacation compensation may be paid continuously by agreement
in cases of long-term illness or other extended absence that has made it impossible to take vacation as intended

Checklist: Ensuring smooth and Compliant Vacation Management

There are many good reasons to keep close track of vacation planning, usage, and follow-up. Here are some practical tips:

Review vacation balances and vacation liability well ahead of the holiday year-end, so leave can be planned and costs do not accumulate unnecessarily.
Share updated vacation lists with managers at regular intervals during the year, for example before and after the summer vacation period and ahead of the Christmas holidays.
Monitor the five-year rule for saved vacation days and plan usage well in advance in dialogue with the employee.
Pay special attention to employees with extended absences, such as sick leave, parental leave, or unpaid leave, to ensure vacation accrual is handled correctly.
Make sure new hires and employees who change their working hours receive the correct number of vacation days.
Always check what applies under the collective bargaining agreement when deviating from the Annual Leave Act.
Ensure managers have access to up-to-date vacation information and clear guidelines for scheduling leave.

Smarter and More Secure Vacation Management with Flex HRM

Do you and your colleagues feel that vacation administration takes up too much time and energy? With Flex HRM, we make it easy to get vacation management right, along with everything else related to payroll and HR administration. Seamless and smart, with all the tools in one system.

Curious to learn more? Get in touch with us.