From reactive to proactive: how to succeed with holiday management
Many companies only discover at the end of the holiday year that their employees have accumulated large amounts of unused holiday. This often raises several questions. Can we pay out the days? Can they be carried over? How many days may be saved? Handling these issues late and reactively can lead to incorrect decisions, increased costs and, in some cases, even breaches of the Holiday Act.
Most companies face a growing need to strengthen efficiency and keep costs down. Personnel costs are the largest expense for most organisations, and accrued holiday liability represents a significant share. When holiday balances build up, they affect both financial results and budgeting.
At the same time, working life is changing – digitalisation, AI, restructuring and higher demands are placing increasing pressure on the work environment. In a working life where we are expected to work longer, recovery is not only important but essential for sustainable performance and health.
Holiday is therefore not only a right, but a strategic tool for achieving sustainability goals, financial stability and healthy employees. To succeed, however, both knowledge and active, long‑term HR work are required.
What does the holiday act say – and why is it so complex?
The Holiday Act is one of the most extensive and frequently misunderstood pieces of employment legislation. It contains a range of details that affect both employers and employees – particularly regarding the rules on saved holiday. The complexity of holiday management lies in the interaction between legislation, collective agreements, local routines and individual circumstances. Below are key elements of the Holiday Act that are important to keep in mind.
- All employees are entitled to 25 days of holiday per year under the law.
- Four weeks (the main holiday) must be scheduled between 1 June and 31 August.
- Planning should take place in consultation, but the employer always has the final say on scheduling.
- The employer is obliged to ensure that at least 20 paid days are taken each holiday year – recovery is a legal requirement.
- Only days beyond the 20 may be saved for future years.
- Saved days may be kept for up to five years, with the possibility of a sixth year if specific conditions are met.
- It is not permitted to save new days in a year when the employee uses saved days.
- The rules apply only to paid days. Unpaid days and advance holiday cannot be saved.
- The purpose of saved days is still time off, not financial accumulation or building a buffer.
The legislation contains several details and exceptions, which means that incorrect or reactive handling often leads to mistakes, unnecessary costs and, in the worst case, breaches of the law.
A sustainable approach ahead of the holiday year-end – Practical steps for employers
For holiday to contribute to recovery, health and a sustainable working life, the work must be structured throughout the year. By continuously monitoring holiday balances, maintaining dialogue with employees and integrating holiday planning into the annual HR cycle, employers create predictability, stability and compliance with both legislation and internal guidelines. Here are some key steps to take when preparing for the holiday year-end:
Create and distribute follow-up reports
Produce up-to-date reports on remaining holiday days and ensure it is clear which days must be taken before the end of the holiday year. Make sure the reports are distributed to managers and aim to automate the process so that follow-up occurs continuously throughout the year, not only at year-end.
Review collective agreements, local arrangements and policy
Rules may differ. Ensure you are following the correct provisions and that routines and reports reflect them.
Provide managers with clear guidelines
Remind managers of the employer’s right to schedule holiday under the Holiday Act. They should engage in dialogue with employees well in advance and follow up regularly so that employees see that the company’s holiday policy is being applied. Ensure managers have the necessary competence and receive the support they need.
Communicate with employees
If someone is reluctant to take saved days, the employer must explain the legal requirements and the reasons why the holiday must be scheduled. Decisions should also be documented.
Follow up holiday taken and analyse gaps for the next year
Check that planned holiday has actually been taken in accordance with the law and company routines.
Identify deviations
It is important to identify employees who have not taken their holiday and analyse the reasons. Causes may include staffing issues, lack of follow-up from managers, skills shortages, organisational barriers or incorrect planning. It should also be examined whether recurring patterns appear year after year. Use this analysis as a basis for improving routines, competence, staffing and communication ahead of the next holiday year.
Can holiday be paid out?
As a general rule – no. Holiday is intended for rest and recovery, not to be exchanged for money. The legislation is clear because the purpose is to ensure that employees actually receive the time off they need to stay healthy, cope over time and remain well in an increasingly demanding working life.
Taking holiday as time off is therefore a central part of a sustainable working life, where employees have the opportunity to recover both physically and mentally.
However, there are a few specific situations where payment is permitted:
- When employment ends. All outstanding paid and saved days must then be paid out.
- For fixed-term employment shorter than three months, if it is not possible to schedule holiday during the short employment period.
- In cases of long-term illness, if an employee has been fully on sick leave during the year and therefore unable to take holiday.
In all other cases, holiday must be taken as time off. Saved days follow the same principle – they are intended for recovery and to support long-term wellbeing, not to be accumulated or paid out.
Working in a structured way with holiday scheduling also helps the company manage the development of its holiday pay liability. A more even pattern of holiday use reduces the risk of the liability growing over time and provides a more stable impact on financial reporting – yet another important reason to work proactively with holiday management.
At Azets, we support companies in establishing effective HR processes, producing clear holiday reports and carrying out continuous follow-up. We are happy to help you create structure, security and quality in your holiday management – so that you can focus on your core business while ensuring a sustainable workplace for the future. Get in touch to learn more.
