An employee must be paid at least their regular or average pay for the duration of the annual holiday. In the Annual Holidays Act, this pay is referred to as holiday pay. How holiday pay and holiday compensation are calculated depends on how the employee is paid.

The amount of holiday pay and holiday compensation is tied to the employee's earnings. The calculated amount of unreceived pay for the period equivalent to time at work is added to the base pay.

Calculating holiday pay

The Annual Holidays Act contains three methods for calculating holiday pay:
 

1. Holiday pay based on weekly or monthly pay
   Employees on weekly or monthly pay have a right to receive their pay for the duration of the annual holiday.
    
2. Holiday pay based on average daily pay
   Average daily pay is used as the basis for employees who work at least 14 days per calendar month and are paid by the hour, on commission or with other performance-based pay. The multipliers used in the calculation are laid down in section 11 of the Annual Holidays Act.
    
3. Percentage-based holiday pay
   Holiday pay for employees not covered by the above two cases are calculated on a percentage basis. This method covers:

• employees on hourly or performance-based pay who fulfil the 35-hour rule,
• employees on weekly or monthly pay who fulfil the 35-hour rule but whose working hours set out in the employment contract do not amount to 35 hours or more in all months, and
• employees entitled to leave.

Percentage-based holiday pay is calculated from the pay earned by the employee for time at work, excluding any increment payable for emergency overtime work and statutory or agreed overtime work. The percentage is determined based on the duration of the employment relationship.

Holiday pay is:

• 9 per cent of the wages if the employment relationship has lasted less than one year by the end of the previous holiday credit year, or
• 11.5 per cent of the wages if the employment relationship has lasted at least one year by the end of the holiday credit year.

A different percentage compensation may be agreed upon in a collective agreement. For example, some collective agreements have specified that the percentage-based method is always used for employees on hourly pay.

Holiday pay must be paid before the start of the holiday

Holiday pay must be paid to the employee before the start of the holiday. For a holiday lasting no more than six days, holiday pay can be paid in accordance with the company's normal pay cycle. It may be agreed in collective agreements or locally based on them that holiday pay is paid in connection with normal pay.

Holiday bonus or end-of-holiday pay is not based on the Annual Holidays Act. It is an increment agreed upon in collective agreements (e.g. 50 per cent of holiday pay), which is usually paid in connection with the summer holiday.

Holiday pay can be checked from the holiday payslip

When an employer pays an employee holiday pay or holiday compensation, the employer is required to provide the employee with a holiday payslip showing the amount of holiday pay or holiday compensation and the basis for its calculation.

Outstanding holiday pay and holiday compensation based on the Annual Holidays Act expire in two years. The period is calculated from the end of the calendar year during which the annual holiday should have been granted or the holiday compensation paid. In other words, your right to holiday pay or holiday compensation expires unless you file a claim within two years of the end of the calendar year in which the payment fell due.

Holiday compensation during an employment relationship

If an employee has worked so little during the holiday credit year that they have not accrued any annual holiday, they are entitled to holiday compensation. The amount is 9 per cent. However, if the employment relationship has lasted for at least one year by the end of the holiday credit year preceding the holiday season, the holiday compensation is 11.5 per cent of the pay received or receivable for the time at work during the holiday credit year, excluding any increment payable for emergency overtime work and statutory or agreed overtime work.

Holiday compensation at the end of an employment relationship

If an employee has unused holidays when the employment relationship ends, the holiday compensation paid for holidays not granted is calculated in accordance with the provisions on holiday pay laid down in the Annual Holidays Act. If the employee has not earned any holiday by the end of the employment relationship, they will be paid a percentage-based holiday compensation calculated on the pay received for the time worked.