Guide

Provision for severance on retirement (odchodné) in Slovakia: when to make it, how to calculate it and how to account for it

IAS19.sk · Updated: 21. 10. 2026

In brief

A provision for odchodné (severance pay on retirement) is a liability of uncertain timing or amount (§ 26(5) of Act No. 431/2002 Coll. on Accounting) that an employer has towards the employees to whom it will pay odchodné in the future. An employee is entitled to odchodné of at least their average monthly earnings on the first termination of employment after becoming entitled to an old-age pension or to an invalidity pension with a decline in the ability to work of more than 70 %, and also when granted an early old-age pension (§ 76a of the Labour Code). The Slovak accounting procedures list the payment of odchodné among the employee benefits for which a provision is made (§ 19(7)(s) of Measure No. 23054/2002-92). Actuarial methods may be used to calculate it, and its value is adjusted to its value at the time of accounting and reporting (§ 19(2)).

Entitlement: § 76a of the Labour Code
At least: 1 × average monthly earnings
Method: IAS 19, paragraph 67
Accounts: 527 · 459 · 323

On this page

This is an English translation of the Slovak guide Rezerva na odchodné. Quotations from Slovak sources are our translation; IAS 19 is quoted from its official English text.

Entitlement to odchodné under § 76a of the Labour Code

Odchodné is governed by § 76a of the Labour Code (Act No. 311/2001 Coll., version in force from 1 September 2026). The entitlement arises in two situations:

Old-age pension, or invalidity pension above 70 % (subsection 1). Odchodné is due on the first termination of employment after the employee becomes entitled to an old-age pension or to an invalidity pension, if the decline in the ability to work is more than 70 %. The employee must apply for the pension before the employment ends or within ten working days after it ends.
Early old-age pension (subsection 2). Odchodné is due on termination of employment if the employee was granted an early old-age pension on an application filed before the employment ended or within ten days after it ended.

In both cases the law sets odchodné at no less than the employee’s average monthly earnings. Further rules:

Odchodné is due to the employee from one employer only (subsection 3).
The employer does not have to pay odchodné if the employment ended under § 68(1), that is, by immediate termination by the employer (subsection 4).
If the employee dies, the day of death is treated as the day the employment ended for the purposes of subsections 1 and 2 (subsection 5).

When the entitlement to an old-age pension arises

An insured person who has been covered by pension insurance for at least 15 years and has reached pensionable age is entitled to an old-age pension (§ 65 of Act No. 461/2003 Coll. on Social Insurance). Pensionable age is individual: the general pensionable age for the year of birth, reduced by 6, 12 or 18 months depending on the number of children raised.

What this means for the calculation of the provision

The amount of odchodné depends on the average monthly earnings at the time of leaving, not on today’s wage. The calculation therefore needs an assumption about salary growth.
Odchodné is paid only to employees who stay with the company until they become entitled. Those who leave earlier do not gain the entitlement with this employer. Turnover and mortality are therefore taken into account.
The entitlement also arises with an invalidity pension where the decline in the ability to work is more than 70 %. Invalidity is therefore not a reason for leaving without entitlement but another route to the payment of odchodné.
The year of payment depends on each employee’s individual pensionable age.
The amount in the law is a minimum. If the company provides more (for example under a collective agreement), the provision is calculated from the higher amount.

Why a provision is made for odchodné

“Provisions are liabilities of uncertain timing or amount” (§ 26(5) of Act No. 431/2002 Coll. on Accounting). At the date as of which the financial statements are prepared, the accounting entity must make provisions in accordance with its accounting principles and accounting methods (§ 26(3)). With odchodné, the time of payment is uncertain, as is the amount (it depends on future earnings) and whether it will be paid at all (the employee may leave earlier).

Provisions are regulated in detail by § 19 of Measure No. 23054/2002-92 of the Ministry of Finance of the Slovak Republic, which sets out the details of the accounting procedures and the framework chart of accounts for entrepreneurs keeping double-entry accounts. Its subsection 7(s) expressly lists provisions for “the payment of odchodné, the payment of benefits to employees on life jubilees or work jubilees and other benefits to employees (employee benefits)”. The amendment of the accounting procedures of 10 December 2025 (Measure No. MF/013819/2025-74) did not change § 19. The provision for jubilee bonuses is described in the guide Slovakia: jubilee bonuses.

Companies that prepare their financial statements under IFRS measure odchodné under IAS 19. Who they are is explained in the guide IAS 19 in Slovakia.

Calculation and formula

Under § 19(2) of the accounting procedures: “When making provisions under subsection 7(s), actuarial methods may be used, and the value of these provisions is adjusted to their value at the time of accounting and reporting.” The same subsection requires the method of making and using provisions to be set out in the entity’s internal rules. Decades can pass between making the provision and paying odchodné, so the future amount is converted to its value today.

The accounting procedures do not prescribe a specific method. IAS 19 prescribes the projected unit credit method in paragraph 67; the official Slovak translation of the standard calls it “metóda plánovaného ročného zhodnotenia požitkov”. In simplified form, it has four steps for each employee:

Expected payment: today’s average monthly earnings (or a multiple of them under a collective agreement) are projected with salary growth to the year of retirement.
Probability of payment: the probability that the employee stays with the company until the entitlement arises (mainly turnover and mortality). Invalidity with a decline in the ability to work of more than 70 % does not exclude the entitlement but creates it, so the model treats it as another route to payment.
Discounting: the expected payment is converted to its value at the balance sheet date.
Attribution to periods of service: the provision covers only the part of odchodné that relates to the service rendered so far. In the simplified approach, this is the ratio of the time with the company so far to the total time until retirement, that is, straight-line attribution from the date of joining.

Simplified formula for one employee:

Provision = M × (1 + g)ⁿ × p × (1 + i)⁻ⁿ × s/S

M: today’s average monthly earnings (for a higher odchodné, the relevant multiple)
g: annual salary growth
n: number of years until retirement
p: probability that the employee stays with the company until the entitlement arises
i: discount rate
s: number of years worked with the company so far; S = s + n: total time with the company until retirement

Note on IAS 19: the period to which odchodné is attributed

Under IAS 19 (paragraphs 70 to 73), benefit is attributed to periods of service under the plan’s benefit formula, from the date when service by the employee first leads to benefits under the plan until the date when further service will lead to no material amount of further benefits.

In its agenda decision of April 2021, the IFRS Interpretations Committee considered a lump sum benefit paid only to employees employed at retirement age. It concluded that service that affects neither the timing nor the amount of the benefit does not lead to the benefit, so the obligation arises only for service from the point at which service starts to affect the amount of the benefit.

Statutory odchodné does not depend on the number of years worked. The attribution period under IAS 19 therefore need not start on the date of joining, and straight-line attribution from joining (s/S) can overstate the IAS 19 obligation. If a collective agreement makes the amount of odchodné depend on years worked, attribution follows that formula.

Accounting

The accounting procedures set these rules for provisions (§ 19(8) of Measure No. 23054/2002-92):

Making a provision for expenses is recorded “in the relevant expense account to which the liability relates”. If the provision relates to several kinds of expense, or no expense account is set for that kind of expense, it is recorded in account 548 – Other operating expenses (or 568 – Other financial expenses).
Using a provision is recorded as a debit to the relevant provisions account with a corresponding credit to the relevant liabilities account.
Releasing a provision, or part of it, that is no longer needed is recorded by the reverse of the entry used to make it.

For odchodné, this means:

The expense account to which the liability relates is 527 – Statutory social expenses: “Account 527 – Statutory social expenses is also debited with severance pay (odstupné) and odchodné” (§ 66).
The provisions account is 459 – Other provisions (account group 45 – Provisions, § 60), or 323 – Short-term provisions, which records provisions “with an expected settlement period of no more than one year when they arise” (§ 50(3)). Account 451 – Statutory provisions is intended for long-term provisions that are made under a special regulation, for example the Income Tax Act (§ 60(2)).

Transaction	Debit	Credit
Making the provision	527	459 (if settled within one year, 323)
Using the provision when odchodné is paid	459 (323)	the relevant account of liabilities to the employee
Releasing a provision no longer needed	459 (323)	527

Assumptions and data used in the calculation

Actuarial assumptions used in the calculation

Mortality rate
Disability rate
Employee turnover rate
Employee data (age, sex, date of joining)

Economic assumptions used in the calculation

Yield curve
Inflation rate
Salary growth rate
Social security contribution rate

Sources

Act No. 311/2001 Coll., Labour Code, § 68 and § 76a (Slov-Lex, in Slovak, version in force from 1 September 2026)
Act No. 431/2002 Coll. on Accounting, § 26(3) and (5) (Slov-Lex, in Slovak, version in force from 1 June 2026)
Act No. 461/2003 Coll. on Social Insurance, § 65 (Slov-Lex, in Slovak, version in force from 1 September 2026)
Measure of the Ministry of Finance of the Slovak Republic No. 23054/2002-92 (accounting procedures for entrepreneurs), full text valid from 1 January 2026, § 19, § 50, § 60 and § 66 (Ministry of Finance of the Slovak Republic, in Slovak)
Measure of the Ministry of Finance of the Slovak Republic No. MF/013819/2025-74 of 10 December 2025 (Ministry of Finance of the Slovak Republic, in Slovak)
IAS 19 Employee Benefits in Commission Regulation (EU) 2023/1803, paragraphs 67 and 70 to 73
IFRS Interpretations Committee: Attributing Benefit to Periods of Service (IAS 19), agenda decision of April 2021
IAS 19 in Slovakia: who measures employee benefits under IFRS