written by Unused annual leave is one of the most common sources of tension between employers and employees — and one of the issues most often overlooked until it becomes a real problem. When an employee leaves the company, any unused annual leave must be compensated financially, and incorrect calculations can create legal risks. But the problem does not arise when the employee leaves: it builds up quietly, month after month, due to the lack of an effective tracking system and clear leave-planning rules.
Under the Romanian Labour Code, employees are entitled to a minimum of 20 working days of annual leave. If these days are not taken during the calendar year, they may be carried over, but they cannot be forfeited or paid out in cash except when the employment contract ends. This straightforward rule, often overlooked in practice, can create hidden liabilities in a company’s personnel budget.
Why does unused annual leave accumulate?
The most common answer is that employees are simply too busy. But the real issue is different: there is no mechanism that provides real-time visibility into leave balances for either employees or managers.
Without up-to-date records, employees do not know how many days they have available, managers do not know how many days need to be scheduled, and HR only becomes aware of the situation at the end of the year or when an employee leaves the company.
Other factors contributing to leave accumulation include:
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No team-level annual leave planning calendar
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Informal approval of leave requests without recording them in a system
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No automated notifications when a leave balance exceeds a predefined threshold
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An organisational culture in which being “always available” is perceived as a virtue
What does the law say about unused annual leave?
Under the Romanian Labour Code (Articles 145–147), annual leave must be taken during each calendar year. As an exception, unused leave may be carried over in justified circumstances — such as illness, maternity leave, or other objective reasons. The maximum carry-over period is 18 months, calculated from the beginning of the year following the year in which the leave should have been taken. For example, unused leave from 2024 may be taken until 30 June 2026.
Payment in lieu of unused annual leave is permitted exclusively when the individual employment contract ends. Any other financial compensation instead of annual leave while the employment relationship is still active is prohibited.
| Situation | What the law provides |
|---|---|
| Annual leave not taken during the year | May be carried over if there are objective reasons |
| Maximum carry-over period | 18 months from the beginning of the following year |
| Financial compensation instead of leave | Prohibited while the employment contract is active |
| Compensation upon termination | Mandatory, calculated proportionally |
| Minimum annual leave entitlement | 20 working days |
The real risks of an uncontrolled leave balance
A large balance of unused annual leave is not merely a planning issue — it represents a real financial liability. If an employee with a high salary accumulates 30–40 unused days and then leaves the company, the resulting compensation may be equivalent to two months’ salary, an amount that may not have been adequately provisioned for in the budget.
There is also a compliance risk: if an employer fails to ensure that employees have the opportunity to take their annual leave, it may face sanctions from the Labour Inspectorate. Responsibility does not rest solely with the employee.
Another risk that is less frequently discussed is that employees with large unused leave balances may be more susceptible to burnout, with a direct impact on productivity and retention.
How to manage annual leave planning effectively
Effective leave planning means creating a system in which balances are visible, requests are managed transparently, and managers have the information they need to make informed decisions.
Some practices that can help include:
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Establishing an annual leave calendar at department level and updating it quarterly
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Defining a maximum number of days that can be carried over (for example, no more than 10 days)
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Sending automatic notifications when an employee has not taken any leave in the previous 90 days
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Approving leave requests through a digital workflow, with immediate recording in the employee records
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Providing managers with monthly reports showing the leave balance of each team member
The role of time and attendance software in managing leave balances
Time and attendance software integrated with HR administration modules eliminates one of the main causes of leave accumulation: lack of visibility.
When a leave request is submitted digitally, approved electronically and recorded automatically, the employee’s leave balance is updated in real time — without requiring manual intervention from HR.
With HR administration software, HR teams can monitor leave balances across the entire organisation, generate planning reports and identify potential accumulation risks early.
MyStaff Notifier adds an additional layer of control: automated notifications alert managers and employees when a leave balance exceeds a predefined threshold or when the carry-over deadline is approaching.
Frequently asked questions
Can an employer require an employee to take annual leave at a specific time?
Yes. If an employee has not planned their annual leave and their balance is accumulating, the employer may unilaterally establish the leave period, provided that the employee is given at least 15 working days’ prior notice.
What happens if an employee cannot take their annual leave for medical reasons?
Unused days resulting from medical leave, maternity leave or other objective circumstances are carried over and must be taken within 18 months from the beginning of the following year.
How is compensation for unused leave calculated upon termination?
Compensation is calculated proportionally based on the number of unused days and the employee’s gross daily salary. An incorrect calculation may lead to disputes, which is why automating this process through HR software is recommended.
If you want to eliminate the risk of accumulating unused annual leave and have a clear, up-to-date view of your company’s leave balances at all times, the Smartree team can configure the appropriate workflows based on the size and structure of your organisation. Contact us for a no-obligation discussion.
