Legislative Decree 713 was issued on November 08, 1991 to regulate paid rest days payable to private sector employees. Twenty-five years have gone by since the issuance of Legislative Decree 713 and throughout all these years this legal rule has been interpreted many times, particularly as regards the vacation indemnity and who should pay it. However, so far nothing has been said as to when it should be paid. The vacation indemnity is usually paid upon cessation of employment, at the time of paying the employee’s social benefits. However, it is worth pointing out that different interpretations are being made both by SUNAT as well as by SUNAFIL regarding the time of payment.
Every employee is entitled to a paid vacation leave of 30 calendar days per year, provided he/she completes one calendar year of services. The date on which the employee can use his/her vacation days can be agreed upon between the employer and the employee and if they cannot reach an agreement, then the employer, exercising its management power, will decide when the employee will use his/her vacation days. In any event, the vacation benefit must be used within the year immediately following the one in which the employee completes one calendar year of services. If the employee does not use his/her vacation days in a timely fashion, then he/she will be entitled to receive:
a) One remuneration for the work that the employee carried out in the month that he/she should have used his/her vacation days.
b) One remuneration for the vacation rest accrued and not taken.
c) A vacation indemnity equivalent to one remuneration because of the employee’s failure to use his/her vacation days when due. This requirement does not apply to managers or representatives having enough autonomy to decide when to use their vacation days. Only an inspector or labor judge is competent to oblige a company to pay this remuneration. What is happening now is that when a labor inspection is carried out, inspectors conclude that the vacation indemnity must be paid once the term available to the employee to use his/her vacation days comes to an end if the employee does not use his/her vacation days; not upon cessation of employment, as usually done before.
We would like to stress that after the issuance of Intendency Resolution 152-2015-SUNAFIL/ILM dated May 2015, actually before, in 2011, SUNAT had already issued an advisory opinion in the sense that the vacation indemnity must be paid upon expiration of the term available to the employee to use his/her vacation days if he/she fails to use them, for which reason the indemnity payable for the employee’s failure to use his/her vacation days when due will be deductible in the tax year it was accrued, in application of the rule enshrined in Article 57 of the Single Revised Text of the Income Tax Law. Thus, both entities consider that the vacation indemnity accrues if the employees fail to use their vacation days within the year immediately following the one in which they acquired the right to use their vacation days; therefore, in said month the employee should receive an indemnity equivalent to one remuneration because of the employee’s failure to use his/her vacation days when due. It is worth considering these tax and labor criteria in administrative proceedings to avoid future contingencies on the deductibility of the vacation indemnity payment or fines imposed by SUNAFIL due to the employer’s failure to pay the vacation indemnity in a timely fashion to its employees.