Summer months traditionally bring a rise in questions about the use of annual leave and the payment of vacation bonuses. Although these two terms are often mentioned together, they are in fact separate entitlements with different legal and tax bases.

While the right to annual leave is one of the fundamental employee rights guaranteed under the Labor Act, a vacation bonus is not a statutory obligation for every employer. Nevertheless, many employers choose to offer it as a benefit to boost employee satisfaction, strengthen employer branding, and provide additional financial support to workers during the holiday season.

Below is an overview of the key rules governing annual leave and vacation bonuses in 2026, including their tax treatment, employee rights, and the practical situations employers most commonly encounter.

Annual Leave – A Statutory Right for Every Employee 

The right to annual leave is regulated by the Labor Act and represents one of the fundamental rights arising from employment. Its purpose goes beyond simply taking a break from daily work duties — it also serves to protect employees’ health, safety, and productivity.

Every employee is entitled to annual leave regardless of whether they work:

• under a fixed-term or open-ended employment contract
• full-time or part-time
• for a private or public sector employer

An employee cannot waive the right to annual leave, nor can an employer replace it with monetary compensation while the employment relationship is ongoing.

How Long Is Annual Leave? 

By law, annual leave must last at least four weeks.

In practice, this means:

• a minimum of 20 working days for employees on a five-day work week
• a minimum of 24 working days for employees on a six-day work week

A collective agreement, work rulebook, or employment contract may provide for additional days of annual leave, but never fewer than the statutory minimum.

Employers often tie additional leave days to factors such as:

• years of service
• level of education
• job complexity
• parental status
• special working conditions

When Does an Employee Become Entitled to Full Annual Leave? 

As a rule, an employee becomes entitled to full annual leave after six months of continuous employment with the same employer.

Before that period elapses, the employee is entitled to a pro-rata portion of annual leave, calculated as one-twelfth of the annual entitlement for each month worked.

For example, an employee entitled to 24 days of annual leave who has been employed for five months would be entitled to 10 days of leave.

Pro-rata annual leave most commonly applies in situations where:

• an employee starts their first job
• An employee changes employers during the year
• an employment relationship ends during the calendar year

Can Annual Leave Be Taken in Several Installments?

Annual leave may be taken in multiple installments, but during the year, the employee must use at least two consecutive weeks of leave in one uninterrupted block, unless otherwise agreed with the employer.

Any unused leave from the previous year may be carried over into the following year and, as a rule, must be used by June 30 at the latest.

For employers, it’s important to plan the scheduling of annual leave in advance to ensure business continuity and avoid organizational difficulties during the summer months.

How Is Vacation Pay Calculated During Annual Leave?

While on annual leave, an employee is entitled to vacation pay (paid leave compensation).

This compensation is calculated in accordance with the Labor Act, the applicable collective agreement, work rulebook, or employment contract, and may not be less favorable than the prescribed minimum standards.

It’s important to stress that vacation pay for annual leave is not the same thing as a vacation bonus (regres).

Vacation pay is a statutory employer obligation, whereas a vacation bonus is an additional benefit that may be paid under certain conditions.

What Is a Vacation Bonus (Regres)?

A vacation bonus is a cash or in-kind benefit that an employer may pay to employees to help cover the increased costs associated with taking annual leave.

Its purpose is to help employees finance their vacation, travel, and other expenses related to time off.

Unlike annual leave, a vacation bonus is not a right derived from the Labor Act.

The right to a vacation bonus may instead be established through:

• a collective agreement
• a work rulebook
• an employment contract
• an employer’s internal decision

If none of these instruments provide for the payment of a vacation bonus, the employer is not obligated to pay it — though they may still choose to do so as a matter of business discretion.

Tax-Free Payment of Vacation Bonuses in 2026

Under current tax regulations, a vacation bonus can be paid out as part of tax-free occasional (non-taxable) rewards.

In 2026, employers may pay employees up to a combined total of €700 per year tax-free in occasional rewards. This cap covers, among other things:

• the vacation bonus (regres)
• the Christmas bonus (božićnica)
• the Easter bonus (uskrsnica)
• other occasional rewards

This means the amount is assessed cumulatively over the course of the year, not separately for each type of bonus.

For example:

• if an employee has already received a €200 Easter bonus
• They can still receive up to €500 more in tax-free vacation bonus

Any amount exceeding the prescribed tax-free threshold is treated as taxable income.

When Does a Vacation Bonus Become Taxable?

If the total amount of occasional rewards exceeds the prescribed tax-free threshold, the excess is treated as income from employment, i.e., as wages.

In that case, the amount above the tax-free threshold is subject to:

• social security contributions
• personal income tax
• any other applicable statutory charges

Employers must also ensure the amounts are properly calculated and reported on the JOPPD form (the Croatian tax authority’s combined reporting form).

Can a Vacation Bonus Be Paid to an Employee Who Hasn’t Worked the Full Year?

The tax-free payment of a vacation bonus is not conditional on how long the employee has worked for the employer during the year. An employer may pay a vacation bonus to an employee who has only been employed for a few months, provided the employee takes annual leave with that employer and the applicable tax-free limits are observed.

In practice, however, many employers use internal policies to set pro-rata bonus amounts based on length of employment during the year.

What If an Employee Works for Multiple Employers?

When an employee works for several employers during the year, or holds multiple concurrent employment relationships, special attention must be paid to the tax-free cap on occasional rewards.

Before paying out a vacation bonus, it is advisable for the employee to submit a written statement disclosing any occasional rewards already received from other employers during the same year.

Employers can also verify certain information through the ePorezna (e-Tax) system to avoid incorrect tax treatment of the payment.

Common Employer Mistakes

The most frequent mistakes in practice include:

• confusing the vacation bonus with vacation pay for annual leave
• paying out tax-free amounts without checking previously paid occasional rewards
• late submission of the JOPPD form
• lack of a formal decision or other supporting documentation for the payment
• misinterpreting the rights of employees who change employers during the year

Proper record-keeping and tax treatment of these payments are essential to avoid subsequent tax risks and potential corrections during an audit.

Conclusion

Annual leave and the vacation bonus are often mentioned in the same breath, but they are two entirely separate institutions.

Annual leave is a statutory right of every employee and an obligation of every employer, while the vacation bonus is an additional benefit that may be governed by internal policies or an employer’s decision.

In 2026, employers still have the option of paying out tax-free occasional rewards totaling up to €700 per year per employee, making the vacation bonus one of the most commonly used forms of employee recognition.

Timely planning of annual leave, correct application of tax regulations, and clearly defined rules for paying out vacation bonuses are key elements of sound human resource management — and they contribute to greater employee satisfaction and retention.