In Finland, according to the Annual Holidays Act, employees have the right to receive salary for their annual leave. The company is required to pay not only the salary but also the fringe benefits and other non-wage labour costs during the vacation period. Additionally, employees are entitled to receive holiday bonus if it has been agreed upon in the collective agreement.
Employers are required to make provisions for the payment of holiday pay. In accounting, this provision is referred to as holiday pay debt and it is recorded on a separate account in the financial statements.
We have compiled the key terms of Finnish annual holidays in this blog post, as well as the most important factors to consider from an employer's perspective when planning vacations.
How are leave days accrued?
The accrual year for annual leave runs from April 1st to March 31st. During this period, employees earn their annual leave entitlement, which is either 2.5 or 2 days per month, depending on the length of their employment. A month is considered a full accrual month if the employee has worked at least 14 days or 35 hours, unless the required number of working days is met.
What is the summer leave season?
The holiday season, during which 24 days of annual leave must be scheduled, starts on May 1st and ends on September 30th. The remaining vacation days, often referred to as winter vacation, are scheduled outside of this period.
How is the timing of the leave determined?
The employee has the right to express their preferred holiday timing. The employee should be consulted, although ultimately the employer has the right to determine the timing of annual leave based on job duties and the company's situation. The employer must confirm the holiday timing to the employee at least one month before the start of the leave or, in exceptional circumstances, at least two weeks before. The holiday should be granted as a continuous period of at least 12 days, and any days exceeding this minimum can be scheduled as separate periods.
How are leave days counted?
The calculation of leave days depends on the collective agreement, which specifies whether Saturdays are included in the count of vacation days. Therefore, a week will consist of either five or six vacation days (if Saturdays are included). There are exceptions for Midsummer's Eve, Christmas Eve, Easter Saturday, May Day, Independence Day, and religious holidays — they do not deduct from the annual leave days.
What is holiday pay?
Holiday pay refer to the salary or wages an employee receives for their vacation period. Holiday pay must be paid prior to the start of the leave.
What is holiday compensation?
Holiday compensation is paid: a) when an employment relationship ends, for any unused vacation days, b) In short-term employment where the employee does not accrue vacation days, 9% of the total wages is paid, c) When an employee leaves to perform military service, voluntary military service, or civilian service, even if their employment relationship does not terminate.
What is holiday bonus?
Holiday bonus refers to an agreed-upon compensation between the employee and the employer, typically amounting to half of the employee's monthly salary. It's important to note that holiday bonus is not defined in the Finnish legislation but a contractual compensation that is specified in several collective agreements.
What is holiday pay debt?
Holiday pay debt is a provision maintained in accounting. It represents the reserve or set-aside amount for salaries that will be paid during the vacation period.
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