Holiday pay and holiday compensation - Alasivu
An employee must be paid at least his/her regular or average wage for the duration of the annual holiday. 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. For the purposes of calculating annual holiday pay, wages not received for periods equivalent to work are added to the actual wages paid.
Calculating annual holiday pay
The Annual Holiday Act gives three ways of calculating holiday pay:
- Holiday pay based on weekly or monthly pay
An employee whose pay has been agreed on a weekly or monthly basis has a right to receive this pay for the period of his/her annual holiday.
- Holiday pay based on average daily pay
The average daily pay calculation is used for those 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 for this calculation are given in section 11 of the Annual Holiday Act.
- Percentage-based holiday pay
Holiday pay for employees not covered by the above two cases are calculated on a percentage basis. Specifically, 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 under their employment contract do not amount to 35 hours or more in every calendar month, and
- employees entitled to free time.
Percentage-based holiday pay is calculated on the pay earned by the employee for time at work during the holiday credit year, excluding any increments payable for emergency work and statutory or agreed overtime. The percentage depends on the duration of the employment relationship.
Holiday pay is:
- 9% of wages if the employment relationship had lasted less than one year at the end of the previous holiday credit year, and
- 11.5% of wages if the employment relationship has lasted at least one year at the end of the holiday credit year.
A different percentage may be agreed upon in a collective agreement. Also, some collective agreements specify that the percentage-based method must always be used for employees paid on an hourly basis.
Holiday pay must be paid before the start of the holiday
An employee’s holiday pay must be paid before the start of the holiday. For a holiday lasting no more than six days, holiday pay may be paid on the company’s normal wage payment day. It may be agreed in a collective agreement or locally that holiday pay is paid in connection with normal wage payment.
Holiday bonuses are not provided for in the Annual Holiday Act; they are increments agreed upon in a collective agreement, for instance 50% of holiday pay, usually paid in connection with the summer holiday.
Check your holiday pay on the holiday pay slip
When an employer pays an employee holiday pay or holiday compensation, the employer is required to give the employee a holiday pay slip showing the amount of the holiday pay or holiday compensation and the basis on which it was calculated.
Claims for holiday pay and holiday compensation based on the Annual Holiday Act expire within two years of the end of the calendar year during which the annual holiday should have been granted or the holiday compensation paid. In other words, you will lose your entitlement to any unpaid holiday pay or holiday compensation unless you file a claim within two years of the end of the calendar year in which the payment fell due.