Keep track of the company’s holiday pay liability – make sure to take annual leave!
Many employees do not take out their annual leave because they do not want or feel like they have the time to take time off. But if the company allows its employees to save up vacation days for too long, the debt builds up and it becomes more expensive when the holiday pay is finally due. Do you recognize your company in this situation?
In Sweden, all employees are entitled to 25 days of vacation per year, this does not mean that it is necessarily paid as paid leave first must be earned. As an employer, you have an obligation to ensure that your employees take at least 20 vacation days each year. In this way, you can also influence the company's holiday pay debt at the end of the year.
Holiday pay liability
The holiday pay liability is the total accrued holiday pay earned by employees and must be recorded on an ongoing basis by companies with employees. For each new day earned by the employee, the holiday pay liability increases. It decreases for each paid vacation day taken by the employee.
If the company allows its employees to save up vacation days for too long, the cost of vacation pay increases. For most employees, salaries increase over time and because holiday pay is calculated on current salary, the liability increases and it becomes more expensive when holiday pay is finally paid out.
Take annual leave
The summer months are the time of year when most people in Sweden take the largest part of their vacation. But it is of course possible to take vacation at other times, for example at Christmas and in winter. To ensure that the holiday pay liability is as accurate as possible at the end of the year. You should check well before the end of the holiday year, which is usually in March, that employees have actually taken their holidays or plan to do so.
If an employee has not taken at least 20 days annual leave
Should the holiday debt list show that an employee has not taken at least 20 days of holiday, check with the employee whether he/she has planned holiday leave at another time. If the person has no vacation scheduled, establish a plan to ensure that the vacation days are taken before the end of the vacation year.
If the employee has missed reporting the taking of vacation days, it is important to correct this immediately in order for the vacation pay debt to be correct.
It's important that both employees and their managers know what applies. Clear rules in the employee handbook or in the policy will avoid any ambiguity around taking and reporting vacation.
Accountor works with payroll management in most Swedish payroll systems and has extensive experience in this area. Please contact us if you need help!
