Vacation allowance: everything you need to know

Posted by Fed Finance in Our employment advice
Posted at 13/11/2023
Vacation allowance: everything you need to know

For many, it's used to take that dream trip. For others, it's used to make ends meet or to balance the family budget. In this article, we'll answer all your questions about vacation allowance - the extra pay that provides an annual economic boost.

Vacation allowance is a financial benefit granted to workers as part of their remuneration package, allowing employees an additional resource during the rest period. The value of the holiday bonus is usually calculated based on the employee's monthly salary and is paid together with the normal salary in the month before the holiday. The aim of this benefit is to allow workers to enjoy their holidays without financial worries, helping with the additional expenses that may arise during this period.

Although this may seem like a straightforward right, many people have doubts about its application. We'll try to answer the most frequently asked questions regarding the payment of this extra remuneration.

Does vacation allowance only relate to working days?

According to the Labour Code, holiday pay must correspond to 22 working days. The exception applies to workers who also work at weekends.

Is it possible to take fewer days of holiday than those established by law?

The law states that  holidays are a fundamental right for every worker. As such, it requires that a minimum of 20 days' holiday be taken each year.

When can employees take their holiday entitlement?

The holiday period must be agreed between the company and the employee. However, there are companies and sectors of activity that impose mandatory holiday periods. All this information must be described in the employment contract so that the employee is aware of this condition. On the other hand, holidays must be taken during the calendar year to which they relate. However, the law stipulates that there may be exceptions and that holiday can be taken at the beginning of the following year, subject to force majeure and prior agreement with the employer.

What happens if holidays coincide with a period of sick leave?

Since the purpose of holidays is to give the worker a rest, whenever they coincide with a period of sick leave, they must be taken when that period of sick leave ends. In this case, you will be entitled to the full holiday allowance.

Is the worker entitled to holiday in the first year of employment?

In the year of employment, the worker is entitled to two working days' holiday for each month worked, which can be taken after six full months of the contract.

When is holiday pay paid?

Generally, holiday pay is paid in full together with normal remuneration in the month before the holiday is taken. It may also be paid in twelfths, depending on what has been agreed with the employer.

How is vacation allowance calculated?

The holiday bonus should be equivalent to the days worked. This amount includes the basic salary, the value of the exemption from working hours (when applicable), shift work and night work and productivity values or bonuses that are provided for in the monthly salary. This amount will always be lower than the salary as it does not include food allowance or other allowances that the worker may enjoy, such as transport or subsistence allowances. In practice, how do I know what I'm going to receive in holiday pay? Here's a basic formula you can use for this calculation (example for a worker who works 40 hours a week): Holiday allowance = (Gross amount x 12 months) / (40h per week x 52 weeks) x 8h x 2 days x number of months worked.

If you prefer, there are various calculators available online to check how much your holiday allowance will be. See, for example, the vacation simulator on the ACT - Autoridade para as Condições de Trabalho (Authority for Working Conditions) website. If you're looking for more information and tips on employability, follow our Job Boards. At Fed Finance we support candidates in developing their career in Finance and Accounting and we guarantee the companies that contact us that their recruitment will be successful.