The holiday pay system in Norway is unique and regulated by the Holiday Act (Ferieloven). It presents several challenges, particularly for larger companies with many employees or international ties. Holiday pay must be accrued the year before it is paid, calculated correctly, and disbursed at the right time, often with different rates depending on collective agreements, age, and position. This makes administration both complex and critical to maintaining trust as an employer. In this article, you’ll get an overview of what holiday pay is, how it’s calculated, and how it’s paid.
What Is Holiday Pay?
Holiday pay is compensation that employees receive in place of their regular salary when they take time off. These funds are earned in the year before the vacation year, known as the accrual year. For example, holiday pay paid in 2025 is earned through work performed in 2024. This ensures that employees have the financial means to take time off without losing income.
Errors in calculation or payment can lead to employee dissatisfaction, legal violations, and potentially financial or tax-related consequences. Many companies underestimate the complexity, especially in cases of layoffs, changes in employment terms, or final settlements. Holiday pay must also be reported correctly in the Norwegian a-melding system, and employers must maintain an accurate overview of both accrual and holiday years.
How Is Holiday Pay Calculated?
Holiday pay is calculated as a percentage of salary and other qualifying compensation paid during the accrual year. According to the Holiday Act, the standard rate is 10.2% for employees entitled to four weeks and one day of holiday. For those entitled to five weeks (often through collective agreements), the rate is 12%. Employees over 60 years old, who are entitled to an extra week of holiday, receive 12.5%, or 14.3% if they have six weeks in total.
The holiday pay base includes regular wages, bonuses, commissions, overtime, and certain allowances. Reimbursements, benefits in kind (such as company car or phone), and education stipends are not included in the calculation.
When Is Holiday Pay Paid?
Holiday pay is typically disbursed in connection with the main holiday, often in June. It is common for employers to pay holiday pay in place of regular salary during the month when the employee takes their main vacation. In the event of employment termination, all accrued holiday pay must be paid no later than the final regular payday before departure. It is the employer’s responsibility to ensure that holiday pay is paid on time and in accordance with the Holiday Act and any applicable agreements.
Tax on Holiday Pay
Although holiday pay is taxable income, it is usually exempt from advance tax withholding when paid. This means that employers do not deduct tax directly from holiday pay. Instead, employees pay slightly more tax on regular income throughout the rest of the year to compensate.
Salary Deductions During Holiday
When holiday pay is paid, a corresponding deduction is often made from regular salary based on the number of vacation days taken. For example, with five weeks of vacation and a five-day workweek, the deduction is for 25 working days. This ensures that the employee is not compensated twice for the same period.
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Understanding holiday pay regulations is essential for both employers and employees. Being familiar with the rules ensures correct calculations, timely payments, and avoids misunderstandings.
We assist medium and large companies in ensuring their routines, systems, and payouts comply with Norwegian legislation. Our specialized payroll and HR team ensures that both holiday pay and deductions are handled correctly, and that management has full control.
If your company is looking for a reliable, efficient, and professional partner with deep knowledge of Norwegian regulations, we are ready to help. We offer tailored solutions for mid-sized and large businesses, including system integrations (e.g., Tripletex), ongoing advisory services, and control over reporting and statutory deadlines.
With us, you get more than just an accurate payroll, you gain a partner who supports internal trust and a strong employer brand.
Get in touch, we’ll help you ensure the correct handling of holiday pay for all your employees.
