Ending an employment contract (umowa o pracę) in the middle of a calendar month raises a number of questions about correctly settling pay and the payment in lieu of unused annual leave (ekwiwalent). Employers need to know the exact rules for calculating amounts due and the deadlines for paying them in order to avoid breaching labour law. These issues are particularly important for protecting employee rights and ensuring compliance with the rules in force.
Paying wages is one of the employer's basic obligations under the employment relationship. Under Article 85 of the Labour Code (Kodeks pracy), wages must be paid at least once a month, on a fixed date set in advance, and wages paid monthly – no later than within the first ten days of the following calendar month. However, the situation becomes much more complicated when employment ends in the middle of a month, which calls for particular care when calculating amounts due and the payment deadlines.
The Labour Code does not expressly set the deadline for paying wages when a contract ends mid-month – it is safer to pay them on the day the contract ends, and at the latest on the payday set in accordance with Article 85 of the Labour Code. Since 27 January 2026, the payment in lieu of unused leave is paid on the payday, and if that date falls before the day the contract ends – within 10 days of the termination (Article 171 § 4 and 5 of the Labour Code). Late payment may give rise to additional employee claims and a breach of labour law
How to calculate pay when the contract ends mid-month
How pay is calculated when an employment contract ends in the middle of a month depends fundamentally on the type of pay the employee receives. The distinction between a fixed monthly salary and pay based on hours worked is crucial for settling the amounts due correctly.
For employees on a fixed monthly salary, the calculation is more complex and requires precise figures. The monthly salary is divided by the number of hours to be worked in the given calendar month. The hourly rate obtained in this way is multiplied by the number of hours the employee is absent from work because the employment relationship has ended.
Calculating pay for employees on a fixed monthly salary requires taking into account all the hours to be worked in the given month. Once the amount for the absence has been calculated, it is deducted from the full monthly salary in accordance with the regulation on determining pay during periods of not performing work (§ 12)
After calculating the amount corresponding to the hours of absence, deduct it from the pay due to the employee for the whole month. This approach follows directly from § 12 section 2 in conjunction with section 1 of the Regulation of the Minister of Labour and Social Policy of 29 May 1996 on determining pay during periods of not performing work (Journal of Laws (Dz.U.) 2017, item 927, consolidated text) – section 2 covers exactly the situation where employment does not cover a full month. This method ensures a fair settlement in proportion to the time actually worked.
Calculating pay is much simpler for employees whose pay depends directly on hours worked. In such cases the employee is entitled to pay only for the hours actually worked, which removes the need for complicated pro rata calculations.
- Determine the type of the employee's pay – fixed monthly or hourly
- For fixed pay – divide the monthly salary by the number of hours to be worked in the month
- Calculate the number of hours of absence because the employment relationship has ended
- Multiply the hourly rate by the number of hours of absence
- Deduct the amount calculated from the full monthly salary
- For hourly pay – pay wages for the hours actually worked
Deadlines for paying wages after the contract ends
The Labour Code does not set out a specific date by which wages must be paid when an employment contract ends in the middle of a calendar month. This legal gap may cause uncertainty about the correct payment date. Nor does it expressly settle whether the payday set in accordance with Article 85 of the Labour Code (e.g. in the work rules) still applies once employment has ended.
It is safer to adopt the solution most favourable to the employee, i.e. to pay wages on the day employment ends, and at the latest on the payday set in accordance with Article 85 of the Labour Code. This approach follows from the basic principle of protecting employee rights and the need to provide the employee with funds immediately after employment ends.
It is safest when the day employment ends is also the day the wages due are paid. The end of employment means the legal bond between the parties is broken and obliges them to settle all obligations arising from the contract that has ended
A pointer to the outer deadline is Article 171 § 4 and 5 of the Labour Code on the payment in lieu of leave: since 27 January 2026 it is paid on the payday set in accordance with Article 85, also when that payday falls after the contract has ended, and if it falls before the termination – within 10 days of the termination.
What speaks in favour of paying on the day the contract ends is that the end of employment breaks the existing legal bond between the parties to the employment relationship and obliges them to settle the obligations arising from the contract that has ended. The employer's basic obligation arising from employing someone is to pay them for the work done.
A later payment, after employment has ended, may be unavoidable where it is objectively impossible to determine the amount of wages due up to the end of employment – the wages are then paid promptly once their full amount has been determined (Article 85 § 2 of the Labour Code).
| Situation | Payment date | Legal basis | Notes |
|---|---|---|---|
| Contract ends mid-month | Last day of employment, at the latest the payday under Article 85 of the Labour Code | Not regulated expressly by the Labour Code (Article 85) | The safest solution |
| Amount cannot be determined | Promptly once the full amount is determined | Article 85 § 2 of the Labour Code | Only in exceptional cases |
| Payment date falls on a day off work | The preceding day | Article 85 § 3 and Article 171 § 5 of the Labour Code | Also applies to the payment in lieu of leave |
Payment in lieu of unused annual leave
The right to a payment in lieu of unused annual leave is one of the most important elements of settling up with an employee when an employment contract ends. Article 171 of the Labour Code provides that if the employee has not used all or part of their leave because the employment relationship has been terminated or has expired, they are entitled to a cash payment in lieu.
Since 27 January 2026, the deadline for the payment in lieu has been set out directly in Article 171 § 4 and 5 of the Labour Code (added by the Act of 4 December 2025, Journal of Laws 2026, item 25). The payment in lieu is made on the payday set in accordance with Article 85, and if that date falls before the day the employment relationship is terminated or expires – within 10 days of that day.
The right to a payment in lieu of unused annual leave arises on the last day of employment. On that day the employee's right to take leave turns into a right to a cash payment in lieu, because the end of employment makes it impossible to take the leave. Payment is made by the deadline in Article 171 § 4 and 5 of the Labour Code
The claim for the payment in lieu arises on the day employment ends, because it is on the last day of employment that the employee's right to unused annual leave turns into a right to a cash payment in lieu of that leave. The end of the employment relationship makes it impossible to take the leave, which automatically gives rise to the right to the payment in lieu.
If the 10-day deadline for the payment in lieu falls on a day that is a day off work at the given workplace, the payment in lieu is made on the preceding day (Article 171 § 5 of the Labour Code). The set payday for wages falling on a day off moves in the same way (Article 85 § 3 of the Labour Code).
Under Article 291 § 1 of the Labour Code, an employee can pursue a claim for the payment in lieu of annual leave for three years from the date it became due. This limitation period gives the employee sufficient legal protection in the event of delays or negligence by the employer. Often it is simpler to use the leave before the contract ends – the rules are set out in annual leave during the notice period.
The employer does not have to pay the payment in lieu of leave if the parties decide that the leave will be used under another employment contract concluded immediately after the previous one was terminated or expired (Article 171 § 3 of the Labour Code). This applies only where the new contract is concluded with the same employer
There is one exception to the obligation to pay the payment in lieu of unused leave. The employer does not have to pay the employee in lieu of leave if the parties decide that the leave will be used during another employment contract concluded immediately after the previous employment contract with the same employer was terminated or expired. Simply concluding a new contract is not enough – the parties must agree on this; the unused days of leave then carry over to the new employment relationship.
Practical aspects of settling up with employees
Settling up with employees when the contract ends in the middle of a month requires particular attention to various practical aspects that may affect the final amount due. Employers must take into account not only basic pay and the payment in lieu of leave, but also any allowances, bonuses and other benefits due to the employee.
When calculating pay for an incomplete month, all pay components due to the employee for that period must be included. This covers overtime allowances, night work allowances, discretionary bonuses and other pay-related benefits.
- Overtime allowances calculated in proportion to the time worked
- Bonuses and awards attributable to the period of employment in the given month
- Function allowances due up to the last day of employment
- Benefits in kind that count towards pay
- Severance pay and other benefits arising from termination of the contract
Particular attention should be paid to the employee's various absences during the month in which the contract ends. Excused absences, such as sick leave or annual leave, may affect how pay is calculated and need to be treated separately.
For employees paid on commission or according to performance, calculating the amounts due for an incomplete month can be especially complicated. All of the employee's transactions and results up to the end of employment must be taken into account.
All pay components due to the employee up to the last day of employment must be included in the settlement. This also covers allowances, bonuses and benefits in kind attributable proportionally to the period of actual employment
Documentation and formal aspects of the settlement
Correctly settling up with an employee when the contract ends in the middle of a month requires proper documentation and formal procedures. The employer should prepare a detailed settlement listing all pay components and how they were calculated. We can prepare the final settlement of pay, the payment in lieu and ZUS contributions as part of our HR and payroll services.
The settlement documentation should clearly state the period for which wages are paid, how the amounts due for the incomplete month were calculated and a detailed calculation of the payment in lieu of unused annual leave. Such documentation serves not only settlement purposes, but also as evidence that the employer has properly fulfilled its obligations.
A manufacturing company with 200 employees had to settle up with three employees whose contracts ended on different days in February. The first employee's contract ended on 10 February, the second's on 20 February and the third's on the last day of the month. Each of them received pay in proportion to the time worked, paid on the last day of employment, and a payment in lieu of unused leave, paid by the deadline in Article 171 § 4 and 5 of the Labour Code. The employer prepared detailed settlement documentation for each case.
The settlement must also take tax and social security contributions into account. Pay for an incomplete month and the payment in lieu of leave are subject to the standard tax and contribution charges, which must be taken into account when calculating the amount to be paid.
The employer should also remember to issue the employee with an employment certificate (świadectwo pracy) and other employment-related documents. The deadlines for issuing these documents are strictly set by law, and missing them may give rise to additional employee claims.
- Prepare a detailed settlement of all pay components
- Calculate pay pro rata for the period worked
- Calculate the payment in lieu of unused annual leave
- Take into account all tax and contribution charges
- Prepare settlement documentation with the reasoning behind the calculations
- Pay wages preferably on the last day of employment (at the latest on the payday under Article 85 of the Labour Code), and the payment in lieu of leave by the deadline in Article 171 § 4 and 5 of the Labour Code
- Issue the employment certificate and other required documents
Consequences of an incorrect settlement
An incorrect settlement with an employee when the contract ends may lead to serious legal and financial consequences for the employer. Breaching the obligations relating to paying wages and the payment in lieu of leave may result in employee claims and intervention by inspection authorities.
An employee who did not receive the wages or payment in lieu due on time has the right to claim statutory interest for late payment (Article 481 of the Civil Code in conjunction with Article 300 of the Labour Code). The amount of this interest is set by law and may significantly increase the employer's costs, especially in the case of longer delays.
Late payment of wages or the payment in lieu of leave results in statutory interest for late payment. The employee can also pursue their claims in court, which involves additional legal costs for the employer
The National Labour Inspectorate (PIP) can impose financial penalties on the employer for breaching the rules on paying wages. These penalties may be significant, especially in the case of repeated breaches or breaches affecting a larger number of employees.
Incorrect settlements may also affect the employer's reputation on the labour market. Information about problems with paying amounts due spreads quickly among employees and may make it harder to recruit new candidates.
In extreme cases, systematic breaches of the rules on paying wages may lead to criminal liability for those responsible for managing the company. The Criminal Code provides for penalties for failing to pay employees' wages.
