Date 04.07.2024
The Norwegian holiday leave and holiday pay ensures that employees have a statutory right to holiday leave every year regardless of what kind of arrangements the employer decides to provide the employees with. The system can however seem complicated. In this article we explain the fundamentals of the Norwegian holiday leave and pay system and clear up some common misunderstandings.
In Norway the right to holiday leave and the right to holiday pay are interconnected but also independent of each other.
In Norway, employees are entitled to 25 working days of holiday leave annually, provided they commenced their role by September 30th of the calendar year. The Holiday Act, which regulates holiday leave and pay, defines all days as working days except Sundays and bank holidays. This effectively grants employees four weeks and one day of holiday each year.
While all employees are entitled to unpaid holiday leave, the right to income during this period is not automatic. An employee does not receive regular salary during holiday leave considering that no work is being performed while on holiday. In order to compensate for the income loss during holiday leave the Holiday Act operates with holiday pay. Holiday pay, amounting to 10.2% of the previous year’s earnings, is accrued based on the remuneration received during that year. For instance, holiday pay received in 2024 reflects earnings from 2023.
According to Holiday Act, holiday pay should be disbursed at the time when the employee takes holiday leave. If the employee splits up the holiday leave throughout the year, then according to the Holiday Act also the payments must be paid out in instalments.
However, the most common practice in Norway involves paying the full accrued holiday pay in June, irrespective of when the holiday is actually taken. When employees receive their holiday pay in June, their regular salary is adjusted by deducting an amount equivalent to regular salary for a period corresponding to the employee’s annual leave. This means that employees receive their holiday pay instead of their usual June salary, regardless of when they actually take their holiday. Subsequently, when employees go on holiday at any other time of the year, they receive their normal salary for that period.
When employees receive their holiday pay in June, an equivalent amount is deducted from their regular salary, corresponding to the holiday leave entitlement for that year. Consequently, employees receive their holiday pay in June instead of their usual salary, irrespective of whether they take their holiday in June or at a different time. Later, when employees do take their holiday leave, they receive their regular salary for that period.
We are now entering the most common period for summer vacation and payment of holiday pay. Questions often arise about determining vacation and what payments the employer should take into account when calculating the basis for holiday pay.
The first paragraph of section 14-9 in the Norwegian Working Environment Act establishes the fundamental principle regarding permanent employment. According to the Norwegian government, a high percentage of permanent employment will contribute to more productive, adaptable, and competitive businesses.
In recent years, there have been several proposed and implemented changes to the Working Environment Act, including stricter regulations on hiring, especially with regards to temporary employment. On June 16th, the government presented proposals for new changes, covering the use of trial periods, the right to written justification statements if part-time or temporary employees request more predictable and secure working conditions, as well as the requirements for written employment contracts and the consequences of deficiencies in these contracts.
