Why unused vacation weighs on the balance sheet
In many Swiss SMEs, vacation is managed as an everyday HR matter, not as an accounting line item. Yet at the year-end closing date, vacation days accrued but not yet taken represent an obligation to employees that must be quantified and recorded on the balance sheet. Ignoring this liability means overstating profit, understating debt and being unprepared when payment comes due — whether during the year or upon termination of employment.
The Code of Obligations requires payment for unused vacation upon leaving employment (Art. 329d CO); collective labour agreements and company agreements may provide more favourable rules. For accounting purposes, the accrual principle (Art. 958b CO) requires costs to be allocated to the period in which the work was performed, regardless of when the vacation is actually taken or settled.
This guide explains how Swiss SMEs can calculate, accrue and monitor vacation liabilities, assess their effect on liquidity and integrate them into year-end closing with tools such as Accountex — without confusing them with other HR provisions such as annual bonuses or severance pay.
Legal basis: vacation rights and payment obligation
Before moving on to journal entries, it is essential to understand which obligation is being accrued. In Switzerland, the right to vacation is governed by federal labour law and, where applicable, by collective labour agreements (CLA/GAV) and internal regulations.
| Aspect | Provision / practice | Accounting relevance |
|---|---|---|
| Legal minimum vacation | Art. 329a CO: 4 weeks (20 days at 5 days/week) for all full-time employees; 5 weeks (25 days) for employees under 20 | Minimum basis for calculating accrued balance |
| Accrual | Pro-rata during the year of service; unless otherwise agreed in the contract or CLA | The accrual grows month by month |
| Compensation upon termination | Art. 329d CO: during employment, vacation must be taken in kind; upon termination, unused vacation is paid in cash if it can no longer be used | Certain and quantifiable obligation → liability |
| CLA and company regulations | May provide additional vacation, limited carry-over or settlement rules | The calculation must reflect actual entitlements, not just the legal minimum |
| Period of use | Art. 329c CO: in principle during the year of service; carry-over possible — unused vacation remains a wage credit until the five-year limitation period (Art. 128 CO) | Influences short-term liquidity planning |
Note: the accrual relates to ordinary paid vacation. Sickness, special leave or unpaid vacation follow different rules and must not be mixed in the same liability account.
When to accrue: Swiss accounting standards for SMEs
The obligation to record a liability for unused vacation depends on the accounting framework adopted by the company:
Abbreviated accounts (CO)
Micro-enterprises and small companies that apply exclusively the provisions of the Code of Obligations may, in certain cases, simplify the recognition of personnel costs — for example if net revenue or financial income do not exceed CHF 100,000 (Art. 958b para. 2 CO). However, even here the accrual principle requires that certain and quantifiable obligations not be ignored if understatement materially distorts the financial position.
In practice, many fiduciaries still recommend vacation accruals for consistency with year-end closing and to avoid profit jumps between fiscal years.
Swiss GAAP FER (SMEs)
For companies that adopt Swiss GAAP FER accounting standards — in particular the recommendations for medium-sized entities — accruals for unused vacation are established practice. The liability reflects the future cost of work already performed but not yet compensated by vacation taken.
Accounting is typically done at month-end or year-end, with an adjustment of the accrual compared with the previous year. For tax purposes, according to Federal Supreme Court case law (9C_192/2024), the accrual is not deductible until the obligation to pay in cash arises upon termination of employment; it remains permissible in commercial accounting.
How to calculate the vacation liability
The most common method in Swiss SMEs combines HR data (vacation balance per employee) with a fully loaded daily cost. Here are the three most widely used approaches:
| Method | Formula | Pros | Cons |
|---|---|---|---|
| Fully loaded daily cost | Vacation balance (days) × (annual salary + employer contributions / annual working days, e.g. 220–260) | Most precise; includes OASI, pension fund, accident insurance/NBU, family allowances, etc. | Requires up-to-date payroll data |
| Percentage of salary | Vacation balance / annual vacation × monthly salary × contribution factor (e.g. 1.18–1.25) | Quick; suitable for homogeneous teams | Less precise with part-time and variable salaries |
| Company flat rate | Vacation balance × fixed CHF/day amount per category | Simple for small teams | Risk of under- or overestimation; review annually |
Numerical example
A company with 12 full-time employees has, as at 31 December, a total balance of 87 unused vacation days. Average annual salary CHF 78,000, employer contributions 18%. Daily cost: CHF 78,000 × 1.18 / 220 = CHF 418.36. Vacation liability: 87 × CHF 418.36 = CHF 36,397. If the previous year's accrual was CHF 31,200, the year-end adjustment is CHF 5,197 debited to personnel costs.
Typical journal entries
Recording follows the standard accrual model. Indicative accounts may vary according to the company's chart of accounts:
Annual accrual (increase in liability)
Debit 6200 Salaries and personnel expenses — CHF 5,197
Credit 2390 Accrued unused vacation liability — CHF 5,197
Vacation taken (use of accrual)
Debit 2390 Accrued unused vacation liability — CHF 3,350
Credit 6200 Salaries and personnel expenses — CHF 3,350
The cost was already allocated when the accrual was recorded; taking vacation reduces the liability without further impact on the income statement.
Settlement upon termination of employment
Debit 2390 Accrued unused vacation liability — CHF 8,367
Credit 1020 Bank — CHF 8,367
Impact on liquidity: accrual ≠ cash outflow
A common mistake in SMEs is confusing the liability recorded on the balance sheet with an immediate payment. The accrual reduces accounting profit but does not generate a cash outflow until the employee takes vacation or leaves the company. However, the liability signals a future commitment that must be integrated into the treasury plan.
For liquidity planning, it is worth distinguishing three scenarios: vacation taken regularly during the year (distributed flow), summer or year-end peaks (temporary concentration) and exceptional outflows from multiple terminations or downsizing. A high and chronic vacation balance — often the result of understaffed teams — indicates a concentrated liquidity risk when employees use accrued vacation or are made redundant.
Balance sheet
The liability increases short/medium-term debt and reduces equity via the income statement. Useful for banks and investors assessing true operating leverage.
Income statement
The accrual is a personnel cost that lowers EBIT. Comparing trends over several fiscal years avoids misinterpretation of profitability.
Cash
Monitoring vacation balance separately in days and the CHF equivalent helps forecast cash requirements in quarterly closing months or periods of concentrated HR outflows.
Integrating the accrual into year-end closing
Year-end closing is the critical moment. Here is an operational checklist for Swiss SMEs:
- 1Extract the vacation balance from the HR system or vacation register as at 31 December (days per employee, including any additional CLA vacation).
- 2Align payroll data: verify actual salaries, part-time arrangements, joiners/leavers during the year and updated employer social contributions.
- 3Calculate total liability using the chosen method and document assumptions and contribution rates used.
- 4Reconcile with the previous accrual: the difference is recorded in the income statement; analyse unusual variations (mass hiring, vacation not taken).
- 5Coordinate with the auditor: provide HR reports, Excel calculations or Accountex exports with traceability per employee.
- 6Plan Q1 liquidity: if many employees have high balances, anticipate the impact on cash flows in the first quarter thereafter.
With Accountex you can link the personnel cost centre to the vacation liability, generate the year-end adjustment and view accrual trends over time alongside other liquidity indicators — without having to rebuild the figures manually every year.
Common mistakes and how to avoid them
| Mistake | Consequence | Correction |
|---|---|---|
| Recording vacation only upon payment | Costs shifted between fiscal years; distorted profit | Systematic monthly or annual accrual |
| Excluding employer social contributions | Liability understated by 15–25% | Use fully loaded cost with verified contribution factor |
| HR data not aligned with accounting | Last-minute adjustments and tension with the auditor | HR closing by 5 January; a single owner for the data |
| Confusing vacation with paid leave | Double counting or incorrect liabilities | Separate accounts and HR policies by absence type |
| Ignoring carry-over beyond the year | Underestimation if vacation accumulates beyond the year of service | Apply CLA/contract rules and consider the entire accrued balance |
Conclusion: vacation as a strategic balance sheet item
Unused vacation is not an administrative detail: it is a simultaneous indicator of team wellbeing, compliance with labour law and balance sheet solidity. Correctly accruing the HR liability allows you to close the fiscal year with reliable figures, engage transparently with the bank and auditor and plan liquidity without surprises.
For a Swiss SME, the ideal process combines timely HR data, a documented calculation method and accounting that records the accrual regularly. Accountex supports this workflow by linking payroll, liabilities and closing reports in a single environment — so that vacation and the numbers speak the same language.