The option of pay-out of frozen holiday funds does not affect the employer's obligations to report holiday allowance accrued during the “transition period”

By Pia Skovgaard Hansen, Mia Boesen

10-2020

On 29 September 2020, the Danish Labour Market Supplementary Pension (ATP), in collaboration with lifeindenmark.dk (Borger.dk), gave access to all employees with frozen holiday funds to request pay-out of a total of 3 weeks' accrued holiday allowance, and more than 1 million employees have so far requested pay-out of accrued holiday allowance. Regardless of this new option for employees, the employer still has the same obligations to report/pay in for the transition period, which we will outline below.

This you should know:

The period from 1 September 2019 to 31 August 2020 was qualified as a so-called "transition period" from the old to the new holiday act, which came into force on 1 September 2020. During this period, employees have accrued holiday allowance which, as a starting point, should have been frozen in a new fund for receivable holiday allowance until the employees retired. As stated, however, it is now possible to request pay-out of 3 out of those 5 weeks.

  • Regardless of this change, however, employers must still remember to report accrued holiday allowance for each single monthly paid employee who was employed on 1 September 2020 and onwards. This report must be made no later than on 31 December 2020.

In connection with the reporting, employers must decide whether they wish to pay in the holiday allowance immediately or whether they wish to keep (parts of) the allowance in the company.

If employers wish to keep (parts of) the allowance in their companies, they must state this to the Danish fund for receivable holiday allowance (Lønmodtagernes Fond for Tilgodehavende Feriemidler) no later than on 31 December 2020 and thereafter annually (no later than on 31 August) confirm to the fund whether the allowance amounts are still being kept in the companies.

At any time, employers may choose to pay the receivable holiday allowance for one or more employees to the fund. If they choose to do so, their obligations to the fund for the specific employee or employees will cease. Employers do not necessarily have to pay in for all employees at once, but it is a requirement to pay in full for any one employee, i.e. no partial settlement for any employee is allowed.

Please note, however, that the holiday allowances will be falling due for payment at the latest when the employee leaves the Danish labour market - for example by retiring or moving abroad.

When the employee leaves the labour market, the fund will pay out the (full/remaining) accrued amount with an annually accrued interest to the employee (depending on whether the employee has requested pay-out of the three weeks), and then collect the amount from the employer. The fund decides each year before the end of July whether receivable holiday allowances, which have been paid out or are to be paid out to the employee in the period from 1 March in the decision year until the end of February in the following year, must be paid by the employer to the fund no later than on 1 September of the decision year.

If you have any questions regarding the rules of payment to the fund for receivable holiday allowances or to the new holiday act in general, you are always welcome to contact Bird & Bird.