Information regarding the new Danish Holiday Act

On 1 September 2020, the new Danish Holiday Act entered into force.  The main new principle is that as from 1 September 2020, employees (with paid salary during vacation) earn the right to take paid vacation days as they earn them, i.e. 2.08 days per month equaling 25 days per year. (The old Danish Holiday Act stated that the 25 days were earned in the calendar year to be taken in the following vacation year from 1 May – 30 April two years after).

The new vacation year runs from 1 September 2020 to 31 August 2021 and the earned 25 days for this vacation year (12 months) can be taken in the period 1 September 2020 to 31 December 2021(16 months).

Issues/clues in connection with the new Danish Holiday Act:

1. Accrued vacation pay entitled salary for the transition year, i.e. 1 September 2019 to 31 August 2020 must be reported to the Danish authorities no later than 31 December 2020
   
   
   • Please note that any bonuses if applicable should be accrued/included in the vacation pay entitled salary for the period. Bonus paid in 2021 relating to the transition period to be filed when amount known.
     
     
   • The accrued amount can fully or partially be paid to the Danish authorities (Lønmodtagernes Feriemidler) or kept by the company. If kept by the company it will be indexed.  The index percentage will be published in June 2021 by the Danish authorities.  Right now, it is still uncertain if companies can pay the accrual as per 31 August 2020 without indexation.  This depends on the Danish authorities’ ability to receive the accrual before it has been indexed in June 2021.  Companies need to inform the Danish authorities no later than 31 August 2021 if they want to keep the accrual or pay it – deadline for paying is the day after, i.e. 1 September 2021.
     
     
   • As at 29 September 2020, the Danish government has decided that as from this day employees in Denmark can request payout of up to three weeks’ holiday pay earned in the transition period.
     
     Previously, the holidays and holiday pay earned in the transition period (1 September 2019 to 31 August 2020) where locked until the employees retired or left the country, but due to the Covid-19 situation, the government has decided that employees can request immediate pay-out to stimulate the Danish economy.
     
     The employees can request payout via borger.dk in the period 29 September 2020 to 1 December 2020. This information has been broadly informed in the Danish media on 29 September 2020.
     
     This will have no impact for the companies / employers, as the government will be paying the holiday pay on behalf of the companies. There is no change to the former provided information regarding companies reporting and payment of the holiday pay accrual for the transition period.
     
     
2. If employees want to have paid vacation days in advance it would be possible based on written agreement with the employer. Policy regarding this is recommended included in the employment contract or “Employee handbook”.
   
   
3. Due to the new Danish Holiday Act, employers need to ensure that the employment contracts/employee handbook etc. are updated if applicable.
   
   
4. Many companies offer additional vacation days to the 25 days ruled by the vacation pay law, i.e. contractual additional vacation days (in Danish “feriefridage”). It is important that the employers follow up how to handle these going forward and update the contracts etc. regarding these if applicable.
   
   
5. Vacation pay to leavers is to be paid end same month as they leave (earlier, it was to be paid in the second month after termination). Going forward companies will not receive an invoice for the net vacation pay but need to use payment instructions from the Danish authorities (by logging into virk.dk) if not paid automatically via the pay roll application’s payment facility (NETS).
   
   
6. The 1% vacation pay (“ferietillæg”) is now to be paid twice a year, i.e. end May 2021 for the period 1 September 2020 – 31 May 2021 and end August 2021 for the period 1 June 2021 – 31 August   Please note that no 1% “ferietillæg” to be paid regarding the transition period 1 September 2019 to 31 August 2020 (as an alternative the 1% can be paid proportionally in connection with vacation taken - very seldom used due to the administration involved).
   
   
7. Companies that pay more than 1% “ferietillæg” must pay the additional amount to the employees for the transition period.
   
   
8. Up to five vacation days can be transferred from one vacation year to the other if agreed in writing (no change to old Danish Holiday Act). If no agreement, then the up to five days to be paid to the employee.
   
   
9. Vacation days earned prior to 1 September 2019, if not used in the “mini vacation period” 1 May 2020 to 31 August 2020, will be transferred to the new vacation year.
   
   
10. Most companies register vacation days taken in one month in the month after. That is also our recommendation to ensure that only actual vacation days are registered and reduce work with corrections.  The timing difference is when applicable for correct calculations of vacation pay accruals handled at that time.
    
    
11. As regards hourly paid employees they also earn the right to 2.08 days’ vacation per month to be taken as from the following month.  If the payroll period ends between the 1^st and the 15^th, then the filing and the payment of the vacation pay to Feriekonto must be made no later than at the end of the month.  If the payroll period ends between the 16^th and the end of month, then deadline for filing and the payment is the 15^th in the month after.  Basis for the calculation is the “vacation pay entitled salary” times 12.5%.  Hourly paid employees do not receive the 1%.
    
    
12. Companies with collective agreements need to ensure following the agreement if different from above.

Please do not hesitate to reach out to your contact person at Grant Thornton or Poul Hansen, Head of Outsourcing, if you have any questions.