Finland's holiday accrual year cutover: practical tips for payroll
Spring brings more than just light and warmth – for HR and payroll teams in Finland, it also marks the end of the holiday accrual year (31 March) and the careful review of holiday records. From a payroll perspective, this is one of the most important phases of the year: annual holiday accruals, absences, and salary and working time changes must all be verified so that employees’ holiday pay and holiday bonus can be calculated correctly, in line with both the law and the applicable collective agreement.
This article walks through when it is worth starting preparations, what HR and payroll need to check, and how to avoid the most common mistakes.
Finland’s holiday accrual year – what does it mean in practice?
The holiday accrual year runs from 1 April to 31 March, and it is the period during which employees accumulate annual leave. This timeframe determines how many days of holiday the employee has earned for the following holiday season.
For payroll, this means the same thorough review each year:
- When the employment relationship began: does the first month accrue holiday, and is the accrual rate 2 or 2.5 days per month?
- Have holidays already taken been transferred correctly from the HR system to the payroll system?
- Are records from previous holiday accrual years accurate and recorded correctly.
Clarify holiday matters at the start of employment
Many holiday record-keeping challenges are easier to prevent than to correct after the fact. The best time to clarify holiday-related matters is right at the start of the employment relationship, when information is fresh and agreements can be put in place correctly.
At the start of employment, you should clarify:
- Does the organisation have its own additional practices for extra holiday days, and have these been clearly communicated to both the employee and their manager.
- Are any additional holidays treated as annual leave or as extra days off? This directly affects holiday pay provisions in accounting.
- Is there an option to convert the holiday bonus into time off, and is the procedure clearly communicated?
Absences, family leave, and salary changes require particular care
The most challenging aspect of holiday record-keeping often relates to absences. Not all absences accrue holiday entitlement, and some do so only for a specific period. Each employee’s situation must therefore be assessed individually.
Particular attention is required for:
- Family leave: under Finnish law, parental leave, pregnancy leave, and carer’s leave accrue holiday entitlement only for a set period. The point at which accrual stops should be checked for each individual, as the threshold can catch employees off guard. Read more: Family leave model in Finland
- Sick leave: accrues holiday entitlement for a maximum of 75 working days. Sick leave that extends beyond the end of the Holiday Accrual Year affects the calculation and must be assessed carefully.
- Changes in working time or salary: if changes have occurred during the Holiday Accrual Year, the employee may require percentage-based calculation.
- Transition to part-time work: does the accrual basis shift from the 14-day rule to the 35-hour rule? This should be clarified at the point of drafting the contract.
- Unpaid leave: if an employee has enough unpaid leave that the 14 working days threshold is not met in a given month, holiday will not accrue for that month – which may come as a surprise to the employee.
- Lay-offs: under Finland’s Annual Holidays Act, a lay-off accrues holiday entitlement for the first 30 working days. The applicable collective agreement may specify a longer accrual period, so the relevant agreement should always be checked on a case-by-case basis.
The basis for calculating holiday pay must be checked carefully
Ensuring the correct basis for holiday pay calculation is one of the payroll specialist’s most important tasks. The collective agreement primarily determines how holiday pay is calculated – but accuracy is always essential in practice.
You must ensure that:
- All pay types (such as commissions and variable supplements) are allocated to the correct Holiday Accrual Year. In commission-based sales roles, for example, it is important that earnings are recorded in the correct period.
- Changes to salary or working time have been factored into the accrual calculation in line with the accrual rule applicable to that individual.
- The allocation of hourly employees’ working hours has been verified. Hours can sometimes split across two months, which affects holiday accrual.
Monthly monitoring makes the spring review far easier
Good holiday record-keeping is not something that happens once a year – it is the result of consistent accuracy throughout the year. When holiday accruals are reviewed monthly for each employee as part of the holiday pay provision process, the spring review at the end of the holiday accrual year becomes significantly more straightforward.
Reports from HR systems are extremely useful: they help identify employees who may have insufficient accrual. System integration with payroll ensures that absence data transfers correctly and prevents manual errors.
Azets experts can help
Annual holiday management involves many details that require accuracy, knowledge of the collective agreement, and strong system expertise. Azets’ payroll specialists can help ensure that your holiday record-keeping is accurate and up to date.