Profit Blog

Jarmo Manninen & Muutosdraiveri Oy


What is the significance of a holiday pay provision in a company's financial management?

11. helmikuuta 2025

A holiday pay provision is a provision made in a company's accounting for future holiday pay and holiday compensation that has already been earned but not yet paid. This provision is made so that the company can prepare for future holiday pay costs and ensure that the company has enough money in its cash register to pay holiday pay and holiday compensation when employees are on holiday.

Too often, holiday pay provisions are only made in companies in connection with the financial statements. If the provision is only made in the financial statements, the income statement and balance sheet are not correct in the other months of the financial year, so that the company's monthly profit and loss statement shows a better profitability than it actually is. If a holiday pay provision is only made in the financial statements, it causes an unpleasant surprise at the company's financial statements stage, when the profitability of the company's financial statements is actually lower by the amount of the holiday pay provision than the total profitability figures in the company's monthly profit and loss statements.

It is advisable to make holiday pay provisions in the company's income statements on a monthly basis, so that the company's monthly income statements give the company's operational management a true picture of the company's profitability. In practice, this means that the company's income statement is then at the same level as the monthly financial statements in this respect.

Holiday pay provisions can be calculated in many different ways. In order for a company's performance reporting to be reliable, it is worth ensuring that holiday pay provisions are calculated correctly.

How is holiday pay provisions calculated in your company and how are they taken into account in your company's performance reporting?

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I hope that you were interested in this matter and that you can continue to be involved.


I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at:








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