The new Danish Holiday Act will come into force on 1 September 2020, however, the preparation for the new Danish Holiday Act to come into force has already begun.
Previously, we have published articles describing "the road to" and the content of the new Danish Holiday Act which can be found in the following links:
1. "The Danish Holiday Act is not in compliance with EU rules"
2. "New Danish Holiday Act finally in the pipeline"
3. "The new Danish Holiday Act has been adopted"
The aim of this article is to give a general introduction to the changes and obligations which the implementation of the new Danish Holiday Act will produce.
Under the new Danish Holiday Act, the accrual year and the holiday year are in alignment. Employees thus accrue the right to paid holiday during a 12-month period (1 September – 31 August the following year) (the "accrual year"). The holiday year runs simultaneously in a 16 months period from 1 September – 31 December the following year.
To avoid that employees accrue up to 10 weeks holidays during a one year period due to the transition to the new holiday scheme, a transition period running from 1 September 2019 – 31 August 2020 is introduced. During this period all accrued holidays will be frozen and will be reported to the "Employees' Fund for Residual Holiday Funds" (the "Fund"), which will administer all holidays during the transition period. Thus, the employee cannot spend holidays accrued in the transition period and will only receive the value of these holidays when the employee is retiring the labour market or leaves the country permanently.
Shortened holiday accrual period
Due to the beginning of the transition period on 1 September 2019 a shortened holiday accrual period has already begun. This means, that during the period from 1 January 2019 – 31 August 2019, the holiday accrual period has been reduced to 8 months (as opposed to the normal 12 month). Holidays accrued during this period (and remaining holidays from previous years) must – as the main rule – be taken in the period from 1 May 2020 to 30 September 2020 (which is one month into the new holiday scheme). If not taken, any remaining holidays will be transferred to the new holiday scheme.
Employers' obligations due to the transition period
During the transition period all accrued holidays will, as stated, be frozen. The employer is required to observe different actions towards the Fund or the Danish Holiday Fund ("Feriekonto") depending on whether an employee is monthly or hourly paid and depending on whether the employee resigns before 1 September 2020 or is still employed after 1 September 2020.
If a monthly paid employee is still employed as per 1 September 2020 the employer must report and/or pay 12.5 percent of the salary during the transition period to the Fund through 'eIndkomst'. In these cases the employer can choose if he prefers to pay the holiday allowance to the Fund immediately or if he prefers to keep the holiday allowance in the company and therefore only notify the Fund regarding the value of the holiday allowance.
If a monthly paid employee resigns his/her employment before 1 September 2020, the employer must report all accrued holidays to the Danish Holiday Fund as usual. The Danish Holiday Fund will hereafter report the holiday allowance accrued in the transition period to the Fund.
For hourly paid employees, the employer must continue to pay the holiday allowance as usual, i.e. also holiday allowance accrued during the transition period. The Danish Holiday Fund will hereafter report the holiday allowance accrued in the transition period to the Fund.
For hourly paid employees where the employer is covered by another holiday payment scheme than the Danish Holiday Fund, i.e. in cases where the employer on the basis of a collective bargaining agreement has agreed not to pay holiday allowance to the Danish Holiday Fund but instead to a special holiday payment scheme, the employer must report and pay the holiday allowance directly to the Fund in the same way as for the monthly paid employees described above.
Reporting to the Fund
Employers who are required to report directly to the Fund, cf. the above, the reporting must be based on a calculation made 31 August 2020 and must be done no later than 31 December 2020. If the employer fails to report the information in time, the Fund may decide that all receivable holiday funds must be transferred to the Fund within 4 weeks.
The employer can choose to pay the holiday funds for each employee concurrently with the reporting and then be released from all its obligations toward the Fund and ultimately the employee. Or the employer can choose to report the amount to the Fund, but not pay the amount yet.
If the employer prefers to only report the amount to the Fund but not pay the amount yet, the employer must each year no later than 31 August confirm to the Fund that the employer still wants to retain the holiday funds in the company. If an employer omits to confirm this within the due date of 31 August, all holiday funds can fall due for payment immediately.
Payment to the Fund
The employer may, at point in any time, choose to pay an employee's holiday funds with any accrued interests to the Fund. If the employer chooses to do so, the employer's obligations towards the Fund regarding the employee in question will cease completely.
When the employee leaves the labour market i.e. due to retirement, the Fund will pay the accrued amounts due, if any, with an annual interest to the employee and will then at the same time collect the amount from the employer.
If the New Danish Holiday Act gives rise to any questions or if you have any doubt on how to implement the new act at your workplace, please do not hesitate to contract Bird & Bird and we will be happy to assist.