Annual leave year-end – carried over annual leave, how long can you save it, or can you?
Guide to handling annual leave in Sweden
According to the Swedish Annual Leave Act, the ‘annual leave year’ runs from April 1 to March 31 the following year. There are many tasks that need to be executed in connection with the change of the holiday year. Here we sort out the concepts and lists what needs to be done.
At the end of an annual leave year, a holiday preparation is made to produce a holiday debt list. An ‘annual leave year’ end is made so that the employee will get their new holiday days and know how many that have been saved since previous years. It is the employer's responsibility to ensure that the employee takes out the days you are not allowed to save for the next holiday year. The payroll systems and payroll consultants are fully aware of this and can answer questions.
The Swedish Annual Leave Act
Since 1938, employees in Sweden have had a statutory right to annual leave. Initially it was two weeks. The number of vacation days was increased to three weeks in 1951. The number of holidays applicable today is five weeks, 25 days, which was decided in 1978. The Swedish annual leave benefits include annual leave, holiday pay and compensation in lieu of annual leave. 25 days is the minimum number of annual leave days you can have in Sweden according to the law. Though it may be more days depending on the collective agreement or agreement between employer and employee.
According to the Swedish Annual Leve Act, the employee first needs to earn their annual leave, in order to be able to have vacation the following annual leave year, this is called the qualifying year. And so it goes on - you take out your annual leave the year after the days have been earned/qualified. This means that the first year as an employee, the annual leave is unpaid.
Annual leave year and qualifying year
The Swedish Annual Leave Act distinguishes between paid and unpaid leave. In order to get holiday pay during your annual leave, you must first have earned it, which is done during the qualifying year. How many days of leave you earn is mainly based on how long you have been employed the year before the year you take your annual leave. You do not qualify for paid holiday per calendar year but per annual leave year. The annual leave year runs from 1 April to 31 March (if this is the annual leave year that your company has chosen).
How it works - Assuming you are hired on August 1 Calendar year 1. (See graph above).
When the employee has been employed for at least two years, he/she has probably earned fully paid vacation and does not have to think about whether any of the vacation days are unpaid.
Advance annual leave
The employer can individually decide whether they want to offer a so-called advance annual leave, which then means that the employee can take paid annual leave already the first year of employment. Paid advance annual leave becomes a debt to the employer, though it does not affect the earning of future paid annual leave. Should the employee resign at his own request within five years, the employer may deduct the amount of the debt against the holiday pay to be paid in connection with the termination of employment.
Payroll annual leave year preparation
- At the turn of the annual leave year, a payroll annual leave preparation is made to produce a holiday debt list.
- After that, the annual leave year end is prepared so that the employee will have their new amount of annual leave days and know how many they have saved since previous years, that will carry over. In the various payroll systems, all deviations before the end of the annual leave year must be included when making a payroll holiday preparation.
- Make sure that all settings in the payroll system are updated
- that all agreements are correct and that the percentage is in accordance with the correct collective agreement.
- Everything that affects the employee's annual leave must be registered in the payroll system until 31 March (or the date on which the company chooses to have the change of the annual leave year).
For example, this must be registered in the payroll system:
- Annual leave taken
- Annual leave-based absence
- Holiday-based salary
- Non-holiday-based absence
- Collective agreement
Deviating annual leave year
It is possible to have other periods than the statutory annual leave year above, if you agree on this in a collective agreement. The opportunity also exists without support in collective agreements, but then it is assumed that the qualifying year and annual leave year coincide. This means that the holiday that will be earned can be taken in paid leave during the same period. The most common is then that the holiday year falls from 1 January to 31 December.
Advantages and disadvantages of a deviating annual leave year
The advantage of the qualifying year and annual leave year coinciding is that as a new employee you get a paid holiday already in your first year as an employee. The downside is that you do not know what the year will be like. A lot can happen. If employees leave, take annual leave, become ill or take too much annual leave, they will then be liable for repayment.
Carry over annual leave days
It is the employer's responsibility to ensure that the employee takes the annual leave days that they are not allowed to carry over, and this must be done before 31 March (or the date you have as an annual leave year-end). The days that can be carried over are the days that exceed 20 days. If you have 20 days or less left, they must be used, there is no alternative to exchange them for cash. It is a mandatory rule to ensure that the days are used before 31 March (the end of the annual leave year). The same mandatory rule applies if you have five-year-old vacation days carried over. It is only in collective agreements at the federal level that you may be allowed to save days longer than five years.
At Accountor we support companies with payroll services in most Swedish payroll systems and have extensive experience of handling all tasks around the annual leave year. You are welcome to contact us when you need help.