Holiday pay, holiday bonus and holiday compensation are often used synonymously. However, they are all different concepts that should not be confused with each other. Holiday pay and holiday compensation are based on legislation, whereas holiday bonuses are based on a collective agreement, an employer’s policy or an employment agreement. What’s more, the three holiday related payments all have a different impact on earnings-related allowance.
Holiday pay
Holiday pay refers to wage income that is paid for a leave period. In other words, it is regular wage income paid for annual leave and taken into consideration in calculating daily allowance. No other salary is typically paid for the holiday. Collective agreements of various industries typically specify the way holiday pay is calculated and when it is paid out. While you are not entitled to daily allowance for your annual leave period in full-time employment, the annual leave period is not an obstacle to the payment of daily allowance in part-time employment. Holiday pay for part-time work is taken into account in the calculation of adjusted earnings-related allowance.
Holiday compensation
Holiday compensation refers to the compensation paid after employment ends or when the employee leaves for national military service, for instance. Holiday compensation has an impact on the right to earnings-related allowance: any untaken annual leave at the end employment is subject to periodisation which postpones the starting date of the right to earnings-related allowance. In practice, periodisation means that the fund calculates the number of annual leave days the received holiday compensation corresponds to in average salary at the end of employment. No earnings-related allowance is paid for this period. The periodisation period runs from Monday to Friday, i.e. five days a week.
Periodisation applies to full-time employment that has lasted for more than two weeks and ended. Holiday compensation paid for part-time employment is not subject to periodisation. Instead, it is adjusted in conjunction with daily allowance payouts.
Periodisation of holiday compensation and the qualifying period do not overlap. The qualifying period starts only after any periodisation of holiday compensation. The qualifying period is seven days.
There may be exceptions to the holiday compensation in different collective agreements.
Read more about periodisation of holiday compensation
Holiday bonus
A holiday bonus, or a so-called end-of-holiday pay, is an additional bonus that is applied to most employments and totals half of the salary for the annual leave period. Holiday bonuses are not based on the Annual Holidays Act but on a collective agreement, an employer’s policy or an employment agreement. The rules on holiday bonus may differ depending on the collective agreement. In other words, an employee is not automatically entitled to a holiday bonus. It needs to be agreed on separately. A holiday bonus paid for full-time work is not regular wage income and is therefore not taken into account when calculating the amount of daily allowance. Furthermore, it is not subject to periodisation or adjustment. However, holiday bonuses for part-time work are taken into account when paying out adjusted daily allowance.
