Holiday Pay in Norway

Aquestion we tend to get a lot is “how is holiday pay calculated in Norway”.

We understand that it may be confusing, and we would like to try and explain it in a way that makes it more understandable.

Here are some basic principles about holiday pay in Norway:

• Holidays are unpaid (ie. an employee is not paid salary when they are on holiday)
• Holiday pay is accrued monthly by the employer as a supplement to all work-related employee wages (ie. it is accrued based on gross salary each month)
• Holiday pay is normally paid in the month of June/July the calendar year after it has been accrued. (ie. holiday pay accrued in 2022, will be paid in 2023)
• Companies normally offer 21- or 25-days holiday – which in turn equates to a holiday rate of either 10,2 % or 12 %, which is accrued each month of the gross salary.
• When an employee is leaving his/her position, they normally get their holiday pay either the month they leave or in January the following year.
• Instead of deducting salary when holiday days are taken, most employers pay full salary each month except the month they pay holiday pay (June/July). This way the employee gets a payment each month.
• The deduction of either 21 or 25 days holiday is done the month they get paid their holiday pay – which means there is a calculation the same month with either a small amount to receive, or a further deduction to be made than one month’s full pay in order for 25 days holiday to be correctly deducted.
• Holiday pay is normally not liable for tax deduction, as the tax rate reflect non-deduction for one month plus reduced tax of 50 % in December. However some tax cards are based on tax deductions on all wage elements, so this may vary.
• Theres is an additional mandatory week given to employees over 60 years old, meaning there is also an addition in the rate of 2,3 % for all employees over 60 years old – regardless if they are on 10,2 % or 12 % holiday pay rate.

Example on different holiday pay rates5-day week (excl. Saturdays)Total number of days annually 52*5= 260 Average number of days pr month 260/12= 21,67 Deficit of pay days deducted when deducting one months’ pay and the company offers 25 holidays
(12 % holiday pay rate) 25 holidays – 21,67 days (one month deduction) = 3,33 days Result: 3,33/21,67 of monthly wage must be deducted Surplus of pay days deducted when deducting one months’ pay and the company offers 21 holidays
(10,2 % holiday pay rate) 21 holidays -21,67 days (one month deduction) = 0,67 days Result: 0,67/21,67 of monthly wage must be paid

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Examples on how to estimate holiday pay

EXAMPLE 1:

John has worked for a company for several years. His annual wage is 600 000, and his company offers 25 unpaid holidays and 12% holiday pay.

In 2022 he got the following pay:
11 monthly wages: 550 000 (600 000/12) * 11
Holiday pay: 65 077 accrued in 2021 (50 000*12% * 11 months – deduction)
Deduction: 7 692 (50 000 * 4/26)
Total pay: 607 385
Total accrued for next year: 65 077 (550 000 – 7 692) * 12%

June payment:
‍Holiday pay: 65 077 (Accrued in 2021)
Deduction: 7 692
One month pay deduction is not enough to cover 25 days
Net pay: 57 385

EXAMPLE 2:

Peter started working on August 1st 2021. His annual wage is 600 000. His company offers 25 unpaid holidays and 12% holiday pay.

In 2022 he got the following pay:
11 monthly wages: 550 000 (600000/12) * 11
Holiday pay: 30 000 accrued in 2021 (50 000*12% * 5 months)
Deduction: 7 692 (50 000 * 4/26)
Total pay: 572 308
Total accrued for next year: 65 077 (550 000 – 7692)* 12%

June payment: ‍

Holiday pay: 30 000 (Accrued in 2021)
Deduction: 7 692
One month pay deduction is not enough to cover 25 days
Net pay: 22 308

ECOVIS is a leading global consulting firm with its origins in Continental Europe with over 9000 employees in 80 countries. In Norway, ECOVIS assists international companies with compliance and global mobility, from company registration through work permit application, legal advice, house finding, VAT returns, tax advisory, accounting to annual tax declerations.