How holiday pay is calculated – formula and example
Holiday pay = average daily pay × number of holiday days. The average comes from the previous six months' pay. Here is the formula, the exception for a fixed salary, and the payment deadline.
The rules for holiday pay come from Government of the Republic Regulation No. 91, “Terms and Procedure for Paying Average Wages.” The principle is simple: while on holiday, the employee gets their average pay.
Formula
Average pay per calendar day = pay for the previous six calendar months ÷ (calendar days in that period − public holidays − days away from work under § 19 of the Employment Contracts Act)
Holiday pay = average pay per calendar day × number of holiday days
The calculation uses the six calendar months before the month in which the need to calculate arises. For holiday pay, that month is the one containing the second-to-last working day before the holiday starts. All pay for work done counts (including bonuses and performance pay), but benefits do not – per diems or sickness benefit, for example.
Example
An employee takes 14 calendar days of holiday. Their pay over the previous six months came to €9,000, and those months had 181 calendar days after taking off public holidays.
- Average pay per calendar day: €9,000 ÷ 181 = €49.72
- Holiday pay for 14 days: 14 × €49.72 = €696.08 (gross, taxed like regular salary)
Exception: a fixed salary
If the employee was paid a fixed amount throughout the previous six months (a fixed monthly salary with no variable pay, for example), no average is calculated – the employee simply keeps their normal pay while on holiday. In practice, the pay for the holiday month does not change.
When holiday pay is due
Under the Employment Contracts Act, holiday pay is paid no later than the second-to-last working day before the holiday starts, unless the parties agree otherwise. By agreement, it can instead be paid on the regular pay day after the holiday.
Common mistakes
- Forgetting to take public holidays off the calendar days – the daily rate comes out too low.
- Using the wrong six months (the month in which the need arises is not included).
- Counting benefits (per diems, sickness benefit) as pay.
Holiday pay and other payroll calculations are included in the monthly fee for our accounting service – see pricing.
