Holiday pay – how is it calculated and paid?
Holiday pay is calculated on the previous year's holiday pay basis, at 10.2% under the Holidays Act or 12% where a fifth holiday week has been agreed. Employees over 60 get an extra 2.3 percentage points, but only on basis up to 6 G. Holiday and holiday pay are two different things: the money was earned last year, the holiday is taken this year, and for monthly-paid staff, pay for the holiday days is deducted in the settlement.
Holiday and holiday pay are two different things
The Holidays Act normally gives 25 working days of holiday – four weeks and one day. A fifth week usually follows from an agreement or a collective agreement. Holiday pay, by contrast, was earned last year, on last year's salary. That is why a new employee can be entitled to holiday without having holiday pay from you – and why someone leaving has holiday pay owing without having holiday left.
What goes into the holiday pay basis?
Typically fixed salary, hourly pay, overtime pay, inconvenience supplements, and bonus or commission where it reflects the person's own work. Benefits in kind normally do not count. A company car and a phone therefore do not build holiday pay, even though they are taxable – see Benefits in kind
The rates
Statutory holiday: 10.2%, or 12.5% from age 60. Agreed five weeks: 12%, or 14.3% from age 60. The extra 2.3 percentage points for employees over 60 is calculated only on holiday pay basis up to 6 G. Above that level the ordinary rate applies.
Holiday pay on sick pay
The employer calculates holiday pay on sick pay paid during the employer period. NAV calculates holiday pay on the first 48 sick pay days per accrual year for employees. On long absences the accrual of holiday pay therefore stops, and that shows up the following year.
When is holiday pay paid?
The Act's general rule is the last ordinary payday before the holiday. In practice many businesses use a single holiday settlement in May or June. That is a practical adaptation, and it assumes the system handles the deduction correctly.
The holiday deduction for monthly-paid staff
Monthly-paid employees receive salary all year, including during the holiday. Pay for the holiday days is therefore deducted in the settlement at the same time as the holiday pay is paid. A common five-week model is monthly salary × 30 / 26. That is a practical model, not a statutory formula. Other models exist, and which one the business uses should be in the staff handbook – not only in the payroll system.
A worked example
A holiday pay basis of NOK 500,000 at 12% gives holiday pay of NOK 60,000. With a monthly salary of NOK 45,000 the holiday deduction under the 30/26 model is NOK 51,923.08. Simplified June settlement: 60,000 + 45,000 − 51,923.08 = NOK 53,076.92 before any tax. The employee therefore gets more than an ordinary month's salary, but less than salary plus the whole holiday pay amount. That difference is what most often prompts questions in June.
Reporting and tax
Holiday pay is reported gross as holiday pay in the a-melding. The holiday deduction is reported separately as a negative item for holiday. Holiday pay is taxable income but is normally free of withholding when paid in the holiday year. On leaving and payment in the accrual year, tax normally does have to be withheld. From 2026 such an advance deduction goes directly to Skatteetaten by the first working day after the salary payment.
New employees and final settlements
A new employee can be entitled to holiday even without accrual with the new employer. The holiday can be taken, but it is unpaid so far as holiday pay is missing. On leaving, accrued holiday pay normally has to be paid in the final settlement. Greenleaf can help with holiday pay calculations, holiday settlements and final settlements – see also A monthly checklist for the payroll run
This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
More on payroll and employees
- Your first employee – what has to be in place before the first payroll?
- Freelancer, contractor or employee – what is the difference?
- Sick pay and reimbursement from NAV – what is the employer responsible for?
- Employer's national insurance contributions – which zones and rates apply?
- Hiring in labour – when is it lawful?
- Expense claims, subsistence and mileage – what can be paid free of withholding?
- Temporary lay-offs – which rules and pay obligations apply?
- Employees abroad or foreign employees in Norway – what applies?
- A monthly checklist for the payroll run – what has to be done, and when?
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