Global Compliance Desk – Denmark

The New Danish Holiday Act

A new Danish Holiday Act was passed by the Danish Parliament on January 25, 2018. The passing of the new Act changes the present holiday entitlement scheme to a concept of concurrent holiday effective on September 1, 2020. The change will take effect for financial years ending on or after August 31, 2019.

The objective of the new Danish Holiday Act has been to address some challenges in the present holiday scheme under which e.g. different accrual models for monthly and hourly paid workers have made it a complex task for both employees and employers to administer holidays. Below are the changes that have been made to the Act:

Concurrent Holiday

The main change will be the introduction of the concurrent holiday. Under the present Holiday Act, Danish employees earn holiday in a calendar year, which is to be taken in the next holiday year running from May 1st to April 30th.

Under the new Act, the holiday year runs from September 1st – August 31st the following year (12 months). However, the period during which holiday can be taken has been extended to 16 months, meaning that an employee may take holiday during the holiday year + an additional four months, i.e. until December 31st. For example, concurrent holiday accrued during the holiday year September 1, 2020 – August 31, 2021, may be taken during the period September 1, 2020 – December 31, 2021.

Accrual

Employees will still accrue 2.08 days of paid holiday per month and accordingly 25 days of paid holiday per year, as per the current act. There will still be two types of holiday pay, i.e. holiday with pay and holiday supplement or holiday with holiday allowance. Holiday allowance relates to hourly paid employees and accrued holidays paid out upon termination of employment.

Transitional Arrangement to Accrued Holiday

Without any special measures, the transition between the current law and the Act would mean “double holiday” for employees as they could potentially take paid holiday earned under both the present rules and the new rules. This could be problematic for employers, as well as for the national economy.

The transitional arrangement implies that holiday entitlement accrued under the current Holiday Act in the period from September 1, 2019, to August 31, 2020, will be frozen and can neither be taken nor paid in lieu. In connection with such freezing, a separate fund will be set up to administer the frozen funds: “Employees’ Fund for Residual Holiday Funds” (Lønmodtagernes Fond for Tilgodehavende Feriemidler).

The employer may choose to retain and pay interest on the frozen funds in the period until the deadline for mandatory payment to the Fund, i.e. at the latest at the time of the employee’s retirement due to age. If the employee retains the funds, it is a requirement that the funds are subject to an annual indexation based on the development of pay. If the employer chooses to retain the funds, the frozen funds will be secured through the Danish Employees’ Guarantee Fund (Lønmodtagernes Garantifond).

Employees’ Holiday Entitlement During the Transitional Year

Holiday entitlement during the period January 1, 2018 – 31 August 2019 is accrued as usual under the current holiday scheme and may be taken during the period May 1, 2019 – September 20, 2020. If the employee has not taken all his holidays accrued under the current Danish Holiday Act on September 30, 2020, the remaining holidays will be carried over as concurrent holidays under the new Danish Holiday Act.

Holiday in Advance

In addition, the new Holiday Act introduces the possibility of taking a paid holiday in advance if an employee has not yet accrued sufficient paid holiday to cover the required holiday period (e.g. in case of compulsory holiday closure). Such advance paid holiday must be agreed between the employee and the employer, and on termination of the employee’s employment the employer may set off the value of such paid holiday against the employer’s other payments to the employee.

Sixth Week of Holiday and Special Holidays

In addition to the five weeks of holiday laid down by law, employees are often granted the sixth week of a holiday or special holidays according to the local agreement with their employer, collective agreement, staff handbook, etc. These extra holidays do not necessarily comply with the rules of the Danish Holiday Act and must, therefore, be accounted for according to the agreement concluded. Accordingly, savings, allocation, and use must be separately recognized.

Holiday Supplement Pay

Under the new act, an employee earns the right to holiday supplements of 1% of qualifying salary. If the employee is employed in a company that is covered by a standard collective agreement or a company collective agreement, the holiday supplement constitutes 3.25% of qualifying salary.

If the employee is not covered by the standard collective agreement or a company collective agreement that is included under the standard collective agreement, a new rule is that the employee may either be paid holiday supplements twice a year (September 1 and May 31) or on an ongoing basis along with salary.