Check holiday pay liability – make sure you account for annual leave!
Holiday pay liability. Many employees don’t take their annual leave, as they either don’t want to or feel that they can’t take time away from work. But if the company allows its employees to save up their holiday allowance for too long, it builds up and gets more expensive once the holiday salary in lieu is eventually paid out. Sound familiar?
In Sweden, all employees are entitled to 25 days’ holiday per year, meaning they aren't necessarily counted as paid leave, because paid leave has to be earned. As an employer, you must ensure that your employees take at least 20 days’ leave each year. This allows you to also affect the company’s holiday pay liability at the end of the year.
Holiday pay liability
Holiday pay liability is the total accrued holiday pay that employees have earned. Holiday pay liability must be reported on an ongoing basis by any company with employees. For each new day the employee has earned, the holiday pay liability increases. It decreases for each paid day of leave the employee has taken.
If the company allows its employees to save holiday for too long, the cost of holiday pay increases. For the majority of employees, salaries increase over time, and given that holiday pay is calculated based on current salary, it builds up and is more expensive when the holiday pay is eventually paid out.
The summer months are the time of year when most Swedes take the majority of their holiday entitlement. Of course, winter and Christmas are other points in the calendar when people take time off. To ensure that the holiday pay liability is as correct as possible at the end of the year, it is a good idea to - before the holiday year ends, often in March - check off that the employee actually has taken their holiday or is planning to do so.
If the employee has not taken at least 20 days’ holiday
If the holiday liability list shows that an employee hasn't taken at least 20 days, check with them whether they have planned to take leave at another time. If the person hasn't planned to do so, prepare a plan to ensure that the holiday entitlement is taken before the end of the holiday year.
If the employee has failed to report any holiday days taken, it is important to correct this immediately so that the holiday liability is correct.
It is important for both employees and their managers to know what is happening. Clear rules in the staff handbook or policies avoids any potential confusion on taking and reporting holiday leave of absence.
Holiday year and qualifying year – Accountor’s guide to leave of absence
Leave of absence can be seen as an awkward area in salary admin and HR. Accountor’s guide to leave of absence provides more good information. Have a read and see answers to some frequently asked questions. See how we calculate holiday allowance.
The guide also provides other information on the different types of absence.
Accountor works with payroll management across numerous payroll systems and has in-depth experience in this field. You are welcome to get in touch and see how we can help you.
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