Vacation is great but difficult
Vacation can be perceived as a complicated area in payroll and HR
The laws and rules around holidays are numerous and are further complicated by collective agreements, staff handbooks and personal employment contracts. Here we look at the most frequently asked questions about holidays and vacation days. These include saving days, parental leave during holidays, holiday pay, holiday supplements, holiday pay and administration.
The hierarchy governing the vacation rules is as follows:
- The law
- Collective bargaining agreements – Collective bargaining agreements can include conditions that improve the employee’s position; for example, it is possible to allow greater flexibility in saving and taking holidays.
- Personal employment contracts
- Staff handbook – The staff handbook is intended to answer frequently asked questions to reduce unnecessary administration. Accountor’s payroll consultants are often asked about, for example, how many days of advance vacation staff are entitled to, or rules around earning and taking vacation. This could easily be clarified in a staff handbook.
Accrual period - Vacation days can either be accrued according to the basic rule in the Vacation Act, i.e. accrual in year 1 and withdrawal in year 2, or (in collective agreements) with so-called coinciding vacation where vacation days are accrued and withdrawn in year 1.
Statutory accrual year/holiday year according to law – This means that the company has not agreed on a different period for holiday accrual and entitlement than the one stated in the law, i.e. 1/4-31/3. All employees receive new holiday days on April 1 if the employer has a statutory accrual year/holiday year.
Vacation entitlement – Number of vacation days an employee is entitled to per year.
General method for calculating the number of accrued vacation days:
Vacation entitlement days of employment calculated in calendar days * Vacation entitlement / 365. For leap years, divide by 366.
FAQ (frequently asked questions):
How many vacation days can I save and for how long?
According to the Annual Holidays Act, you are allowed to save all days in addition to the 20 that must be taken. The law allows vacation days to be saved up to five years, after which they must be taken as leave. If the employee has not scheduled vacation in the last six months, the employer must reschedule the leave. If the employee has 30 days of vacation entitlement and has days saved in year five, the procedure is as follows: five days must be taken as leave and the remaining saved days are paid in cash or carried over to year six as agreed. The parties can negotiate the right to save more days and for a longer period.
How do you calculate the financial value of a day of vacation?
5.4% of the monthly salary per day (according to most collective agreements). For staff with no fixed monthly salary or variable seniority: accrued salary during the year of accrual x 0.12 / vacation entitlement. There may be exceptions where deductions may need to be made.
How to calculate the company’s holiday pay dept and what does it mean? Should the company try to minimize the holiday pay liability?
The holiday pay liability is the total accrued holiday pay earned by employees. Companies with employees must record the holiday pay liability on an ongoing basis. The holiday pay liability increases for each new day of holiday earned by the employee and decreases for each paid day of holiday taken by the employee. Usually, wages increase over time and holiday pay is calculated based on current wages. If the company allows its employees to save up vacation days for too long, the debt will build up and it will be more expensive when the vacation pay is finally paid out.
Staff on parental leave – how much leave are they entitled to?
During parental leave it is 120 days of paid leave per child (180 days for a single parent). If you are entitled to 25 days’ leave, you earn nine days’ leave during parental leave according to the calculating method above (but collective agreements may provide for a different rounding). If parental leave is interrupted for paid or unpaid vacation, this also counts as vacation pay.
How many days of annual leave are workers entitled to?
Employees are entitled to at least 25 days of vacation per year. Vacation days are always whole days. If the employee has not earned all the vacation days for the year due to, for example, late employment or illness, he or she is still entitled to take unpaid vacation for the days not earned. In the case of new employment after August 31, the employee is only entitled to take five days.
Is the employee entitled to continuous summer vacation?
Employees have the right to take 20 consecutive days of vacation during the period June-August. Exceptions that improve the conditions for the employee can be negotiated in collective agreements or employment contracts. Employers should take employees’ wishes into consideration when planning their holidays, as far as possible given the nature of the business, but ultimately it is the employer who decides how the holidays are taken.
Clear rules make for more confident employees. A staff handbook can be a useful tool.
What happens if the worker falls ill during the holiday? Do they have right to call in sick and save vacation days?
In the case of illness during vacation, the same rules apply as for illness during periods of work. The employee must report sick to the employer immediately, after which the qualifying day and sick pay apply. The vacation days are then saved and can be taken at another time. In some cases, the employer may request a medical certificate.
What is advance vacation?
Some employers choose to offer advance vacation to new employees. This allows the employee to take vacation without having earned any vacation days. If the employee quits within five years, the debt for the advance vacation must be paid back to the employer. However, if the employee is dismissed by the employer, the debt is forgiven.
What is unpaid leave?
Leave without pay. To calculate the payroll deduction for unpaid leave, 4.6% of the monthly salary is deducted per day (unless collective agreements state otherwise).
What is holiday pay and how is it calculated?
Financial compensation paid in the month after the vacation is taken instead of regular salary. For staff on variable pay, hourly pay or variable hours, holiday pay is calculated at 12% (the law says 12% but may differ based on local agreements/collective agreements) of the salary earned during the holiday year. For persons with a fixed monthly (or weekly) salary, the holiday pay is calculated as a regular monthly (weekly) salary plus a holiday supplement.
What is a holiday allowance?
The holiday supplement is only applicable if the employee has a fixed monthly salary. If there is no collective agreement, the statutory 0.43% applies.
For most collective agreements, the holiday supplement is 0.8% of the monthly salary, but it may differ in some agreements. The holiday supplement is calculated as monthly salary x the supplement factor x the number of days taken and must be paid no later than the month after the vacation days is taken (alternatively as a lump sum, usually at the beginning of June).
Why aren't the accrued days deducted first instead of the current ones?
In the first instance, remaining accrued days are used, and in the second instance, saved days. The reason is simply that this is what the Annual Leave Act says.
How many vacation days do I have left?
The answer is usually given in the pay slip. Keep in mind that changes in holiday balances are one month behind. If the company has a staggered vacation year, absences may affect the entitlement to paid vacation days. Vacation days are not fully earned until the end of the accrual period.
