The vacation season in Europe is here, so it is high time to remind ourselves how the vacation pay is calculated in different countries. In the following article, we will explain how employee’s vacation pay is calculated in Estonia, Sweden, Finland, the UK, Lithuania, and Latvia.
In Estonia, vacations are calculated according to a working year, which begins when an employee starts working with the employer. The annual leave is usually 28 days, and it is calculated in calendar days. An employee who has worked at least six months during the first working year is entitled to a vacation for each month worked.
Vacations are generally based on a vacation schedule, which the employer makes available for the employees usually within January but not later than by the end of first quarter. The parties can agree to any changes in the vacation schedule.
In general, the vacation schedule is drafted according to the interests of the employers. If possible, the employees’ interests are also considered. Vacation days can be taken in parts, but one part must be at least 14 consecutive days during the calendar year.
Vacation pay is based on:
- The calendar days (which do not include public holidays and sick or vacation days)
- The salary earned by the employee during the six months preceding the month in which the holiday pay is calculated.
How is the vacation pay calculated?
The holiday pay is calculated on the sum of a six-month salary divided by the number of the six-month calendar days to get the average calendar day value. The average calendar day value will be multiplied by the number of calendar days of the leave.
If the employee was paid a fixed salary during the six months preceding the month in which the holiday pay is calculated, the employer can decide whether to pay holiday pay according to the six-month average daily pay or the employee will be paid a fixed salary as holiday pay.
In Sweden, the holiday year often runs from 1 April to 31 March. Employees are entitled to at least 25 vacation days, while weekends are not countable as vacation days. According to your contract of employment or collective agreement, you may qualify for additional vacation days.
If you have been an employee throughout the entire holiday year, you will have earned your right to vacation pay for all your annual vacation days. If you have only been an employee for part of the holiday year, some of your vacation days will be unpaid. For example, if an employee starts working after 31 August, he/she is only entitled to five vacation days that year. One can also leave a certain number of vacation days unused that are carried over for up to five years.
What does vacation pay consist of in Sweden?
- Your vacation pay will usually consist of your ordinary monthly salary, bonuses, commission fees, and additional variable pays.
- Vacation pay is subject to standard income tax and employer social fee contribution rules.
How is vacation pay for employees calculated in Sweden?
- In Sweden, vacation pay is 12% of the employee’s gross salary. It accumulates during the whole year into the vacation pay reserve and is paid out together with a premium of 0.43% of the monthly salary when the employee goes on a vacation.
During the summer months (June, July, and August), employers are obligated to provide each worker four consecutive vacation weeks.
If you need assistance with calculating vacation days or pay, we are glad to offer our help. Please send us the employee’s employment contract, information about the number of days the person has worked during the holiday year, and the A-Tax certificate so we can offer you the best service.
In the UK, an employee is entitled to have a minimum of 5,6 weeks of paid vacation per calendar year. Employees may have more vacation days depending on the employee’s employment contract, but it must not go below the statutory minimum of 5,6 weeks.
Calculation of the vacation days depends on the working pattern. For example:
- Fixed hours and fixed pay part-time or full-time – a week’s vacation pay equals an employee’s weekly salary.
- Variable hours workers – a week’s vacation pay is the average pay a worker got over the previous 12 weeks (in which they were paid).
In Finland, the holiday year runs from 1 April to 31 March, and the number of days an employee is entitled to depend on the number of years they have worked. If the employee’s contract has lasted less than one year by 31 March, they are entitled to two vacation days per worked month, and if the contract has lasted over a year, it is 2,5 days per worked month.
Saturdays are also counted as vacation days. The rule is that summer vacations are generally used up between May to September and winter vacations between October to April. However, the parties can also agree on a different vacation schedule.
So, simply put – an employee, who has been working for an employer for over a year, can take out 4 weeks of vacation in the summer and 1 week in the winter.
Exceptions apply to calculating the vacation time of part-time workers. To earn vacation days, the employee has to work at least 14 days or 35 hours per month.
How is the vacation pay calculated?
The vacation pay is calculated according to the salary in the employment contract and is generally equal to the regular salary. There are exceptions for part-time workers who also get a vacation compensation (9% to those who have worked less than a year, and 11,5% to those who have worked longer, but the percentage might differ depending on the specific collective agreement).
Usually, vacation pay is paid out before the start of the vacation. However, the pay for a one-week vacation can be paid out on the regular payday.
Of course, in calculating and paying the vacation pay, there are also many exceptions related to collective agreements. So before calculating vacation time and pay, it is recommendable to look at the Finnish vacation law and the collective agreements of the field in question.
In Lithuania, the number of vacation days depends on the number of working days per week. Employees who work five days a week are granted at least 20 workdays of vacation per calendar year. If a person works six days a week, he/she is granted at least 24 workdays of annual leave per calendar year. If the number of working days per week is less or different, the employee must get at least a minimum of four weeks of vacation per calendar year.
However, employment contracts, collective agreements, and labor law norms may provide a longer annual leave.
Long-term employment at one company will give the employees additional vacation days per calendar year. Working more than 10 years in one company will grant the employee three additional vacation days. Each subsequent five years will give another extra vacation day per calendar year.
The vacation pay is calculated based on the average salary of the last three months.
The annual leave must be used up over three years after the ending of the calendar year when the vacation days were acquired. Otherwise, the right to take out the vacation or receive cash compensation for it will be lost. The exception to this rule only applies if the employee was not able to take out the vacation days during the three years due to unexpected circumstances.
Replacement of annual leave with cash compensation is usually prohibited, except at the end of the employment relationship when the employee is compensated for all or part of the unused annual leave. The compensation is paid for a maximum of three calendar years when the annual leave was acquired.
In Latvia, a vacation is at least four calendar weeks per calendar year, not counting the public holidays. An employee has the right to request annual paid leave for the first year if he/she has worked for the employer for at least six months without interruption.
Vacations are given out based on the agreement between the employee and the employer or with a vacation schedule that the employer drafts taking into account the employee’s wishes. The vacation can be taken out in parts. However, each year one part has to be at least 14 consecutive days.
Annual paid leave shall be transferred or extended in case of sick leave or other unexpected circumstances.
Vacation pay is calculated based on the employee’s average salary over the previous six months.
Please contact us if you need help with calculating either vacation pay or the number of vacation days. The fee is based on our regular accounting hours.