How Does Holiday Pay Work in Norway?

How Does Holiday Pay Work in Norway?

How Does Holiday Pay Work in Norway? A guide to Feriepenger. 

In Norway, annual leave is essentially time off without pay. This is where holiday pay (feriepenger) comes in, its purpose is to replace your regular monthly salary during the period you are actually taking your vacation.

Understanding the calculation and regulations governing feriepenger is vital for seamless HR management and Compliance. Below, we break down the key principles, statutory rates, and payout rules.

Key Points to Remember

  • It is NOT an extra bonus: Holiday pay does not accumulate on top of a full regular salary in the month it is paid. It replaces it.
  • Based on the previous year: If an employee did not work or earn an income in Norway during the previous calendar year, they are not entitled to holiday pay (even though they still hold the legal right to take vacation days).
  • The calculation base: The amount is calculated strictly on remuneration for personal work effort (such as base salary, bonuses, and commissions). Reimbursements like travel, mileage, or accommodation costs are excluded.
  • Taxable income: Holiday pay is subject to income tax. However, tax is normally not deducted at the time of payout because the tax burden is distributed across the other regular salary payments throughout the year.

Statutory and Common Rates
The percentage used to calculate holiday pay varies depending on the employment contract and the employee's age:

  • Minimum rate: 10.2%
  • Common rate: 12%
  • Employees over 60 years old: Minimum of 12,5%

Payout Rules
The processing and distribution of feriepenger follow strict regulations under the Norwegian Holiday Act:

  • Timing: It is typically paid out in a specific month, most commonly in June across the Norwegian workforce.
  • No payout without time off: It is illegal to receive holiday pay for vacation days that have not been used. The only exception where unused holiday pay can be paid out is upon the termination of the employment relationship.
  • Leaving a job: When an employee leaves a company, they are legally entitled to receive all accumulated holiday pay earned up to their final working day.

Practical Calculation Example
To illustrate how the system works, here is a simplified example of an employee entitled to 5 weeks of holiday (12% rate):

  • Income earned in 2025: 1,100,000 NOK
  • Current monthly salary: 100,000 NOK
  • Holiday pay rate: 12%
  • Vacation days: 25 working days

1. Total Holiday Pay Earned

1,100,000 NOK x 12% = 132,000 NOK

2. Salary Adjustment (Deducting vacation days)
Since the total vacation allowance (25 days) exceeds the average working days in a single month (22 days, or more accurately 21.67), the company deducts the 3 extra days using the average daily salary:

  • Average daily salary: 100,000 NOK / 22 = 4,545.45 NOK
  • Deduction for 3 days: 4,545.45 NOK x 3 = 13,636 NOK

3. Holiday Payout 

132,000 NOK - 13,636 NOK = 118,364 NOK

Note: This is a simplified overview. Actual calculations may vary depending on specific employment contracts and collective agreements (tariffavtaler) applicable to your industry.

 

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