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12 / 04 / 19

Finnish holiday bonus – essentials explained

Have you ever wondered what the deal is with the unique practice of holiday bonus payment we commonly observe in Finland? For us Wise HR Consultants the recurring questions about holiday bonus are especially asked during this time of year, on the threshold of the holiday season. Typical questions are what’s the amount of the holiday bonus, when should holiday bonus be paid or what is payment based on?

As I think the issue of holiday bonus is often being pointlessly mystified, I decided to write a Blog-text for the benefit of all international organisations having employees in or thinking of entering the Finnish labour market. And even if you are a Finnish employee or employer, you’re of course welcome to read on if you want to get some insight into the legal basics of holiday bonus.

In short, anyone who wants to understand clearly and concisely what holiday bonus (FIN: “lomaraha” or “lomaltapaluuraha”) is should read this text. Let’s dig in!

Firstly, it’s good to start off with acknowledging that almost every employee in the Finnish labour market has received holiday bonus at some point or during the majority of his or her professional career. It’s also quite safe to say that most employees are expecting to receive holiday bonus in addition to the regular pay for annual holiday. But if we were to enquire from a random employee, employer or manager from which provisions holiday bonus payment is derived, probably not everyone knows the answer. *However, more people in Finland are likely to know the answer after the massive political debates and demonstrations leading up to the labour market KIKY-agreement in 2016.  I would argue that very often the confusion with holiday bonus is simply due to the fact that Employment Contracts don’t usually include a term about holiday bonus even if it is paid.

So, what is this elusive holiday bonus then?

Simple clear-cut explanation => holiday bonus payment is an extra compensation (usually) amounting to 50% of the total annual holiday pay.

The tricky part is that there are no provisions about holiday bonus in the Finnish Annual Holidays Act (or any other law for that matter). Holiday bonus payment can generally be based on one of the three following (list is not exhaustive):

1) term in collective agreement that is being applied,

2) term in individual employment contract or

3) established practice.

As for elaborating the above-mentioned alternatives 1-3, I think it would take a master’s degree worth of studies to fully explain how duty to pay holiday bonus is born and how it could possibly be changed. That’s why I’ll only say a few words on the different scenarios. The 1st scenario can be especially tricky in a situation where it is not clear what (if any) collective agreement is applicable. *If you would like to learn more about collective agreements in Finnish employment contracts please re-visit my blog-text from 2018 (sorry in Finnish) 😉. Scenario N:o 2 is quite clear, however a rarity as I mentioned above. And the one causing most grey hairs for employees, employers, managers, HR, lawyers, courts and labour market associations is scenario N:o 3 – established practice. It’s not always easy to determine whether a practice of holiday bonus is established or not. And it’s also quite difficult to evaluate established practice as it can be formed in several ways, both on collective and individual levels.

There you have it, Finnish holiday bonus explained!

Malou Blomqvist, HR-Consultant

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