What is holiday pay reserve?

Summer holidays are almost here and the first employees will be going on their summer holidays within the next two months. When holiday pay reserves are in order, the entrepreneur himself can also have a relaxing summer holiday.

An employee accumulates paid holidays when he has worked a minimum of 35 hours or 14 days a month depending on the contract. Holidays start to accumulate as soon as the employee starts work. At first the employee accumulates two holiday days per month, but later on they are entitled to two and a half holiday days per month. These holidays accumulate into the company’s holiday pay reserve and from there into the company’s balance sheet. An up-to-date income statement includes all changes in the holiday pay reserve on a monthly basis. As a general rule, your balance sheet should always reflect the liability you owe to your employees when it comes to vacations. If these changes are not entered into the balance sheet on a monthly basis, they must be entered into the company’s yearly financial statement.

The accumulated holiday days increase the holiday pay reserve and it decreases when holidays are kept. Employers can also decide how the reserve gets used by indicating that all employees must keep their holidays in July for example.

If the company pays a holiday allowance, the reserve is also paid from the holiday allowance. In addition to this,k the company has to calculate the social cost provision, which is currently 22.5 percent.

Payroll calculations give the company a holiday pay reserve calculation that is accurate to the penny. Either an outsourced wages clerk or the company’s own wages clerk possesses all information in regards to employee payroll, accumulated holiday days, social cost rates and the way the reserve is calculated. With the help of all this information, the wages clerk is able calculate the reserve correctly and on time. Once the reserve has been calculated, a bookkeeper will enter the changed reserve into the company’s balance sheet.

Entrepreneurs, please remember to keep your summer holidays! Even just a few efficient days of holiday can help you think more straight and be more creative.