Holiday pay

According to current law, holiday pay must be calculated in holiday hours for each month. The holiday hours are then added up for the whole year and multiplied by current hourly wages when holiday time is taken.

This means that holiday pay is wage-insured (see also law no. 30 from 1987 about vacation).


Holiday hours are found by finding the holiday percentage (10.17%/24 days, 11.11%/26 days, 11.59%/27 days, 12.07%/28 days, 12.55%/29 days or 13.04%/30 days) of total wages and dividing daytime hourly wages into this result. Daytime hourly wages are found by dividing 160 hours for office workers and 170 hours for shop assistants into fixed monthly wages. In the example here below, holiday time is calculated for a shop assistant.

  • Daytime ISK 260.000
  • Overtime ISK 45.000
  • Total ISK 305.000

Daytime hourly wages are:

Fixed monthly wages ISK 260,000/170 (divisor) = ISK 1,529.41 per hour in daytime.

Holiday hours are:

Total wages 305,000 x 10.17% = 31,018/1,529.41 daytime hourly wages = 20.28 holiday hours.
When the wage earner goes on holiday, his hourly wages have increased to ISK 1,617.64, e.g. due to wage changes. His holiday hours are then calculated for the year at ISK 1,617.64 and not at ISK 1,529.41 each holiday hour.

Taxes must be paid of the holiday pay as well as all other fees, as this is a normal wage payment.

Holiday rights

  • The holiday year is from 1 May to 30 April and the holiday period is from 2 May to 15 September. Holiday pay must be paid out upon employment termination. Holiday time is taken in consultation with the employer.
  • Everyone has a right to 24 days of holiday time, even if they do not have a right to holiday pay from the employer for the whole time.