On 25 January 2018, a new Danish Holiday Act was adopted which will come into force on 1 September 2020. The new Act introduces “concurrent holiday”, which means that holiday can be taken concurrently with holiday entitlement accruing. The new Act thus changes the fundamental principles on how holiday is accrued and how to take holiday which are characteristic of the present Holiday Act.
Introduction of concurrent holiday
According to the provisions of the present Holiday Act, accrual and taking of holiday is staggered with the result that it may take up to 16 months before a new salary earner on the labour market has accrued entitlement to paid holiday. The purpose of the new Act is to align the Danish Holiday Act with Denmark’s international obligations, including EU law and the Working Time Directive, and to introduce a simpler holiday system. The new Act introduces concurrent holiday which means that holiday can be taken concurrently with holiday entitlement accruing.
In connection with the introduction of concurrent holiday the holiday year is changed to 1 September to 31 August. Holiday is taken during the holiday period, which comprises the holiday year during which holiday is accrued, and the subsequent four months until the end of the calendar year. The holiday period thus constitutes 16 months. However, a minimum of four weeks of the holiday must be taken during the holiday year.
Many of the present Holiday Act provisions continue to apply
Many of the present Holiday Act provisions continue to apply. According to the new Act the employee will still be entitled to 5 weeks of paid holiday per year. The right to paid holiday accrues with 2.08 days of paid holiday per month. The holiday payment still consists of either holiday with pay and holiday supplement or of payment in lieu of untaken days of holiday. Holiday is still taken with 5 days a week and in the same way as the work has been organised time-wise. The guidelines for placing the holiday remain unchanged – The employee is entitled to take a minimum of 3 weeks’ accrued holiday as a consecutive period (the main holiday period) during the period from 1 May to 30 September. The employee is entitled to take additional holidays as a minimum consecutive period of 5 days. As a general rule, holiday pay is still paid to FerieKonto, and any holiday not taken is paid upon termination in the form of payment in lieu of untaken days of holiday to FerieKonto.
The provisions of the Holiday Act on notice of holiday can no longer be deviated from in the employment contract
Notice of main holiday must still be given no later than 3 months before the beginning of the main holiday, and notice of additional holiday must be given no later than 1 month before the beginning of the holiday. As opposed to the present Holiday Act, the rules on notification can, in general, no longer be deviated from by agreement between the employer and the employee to the detriment of the employee in the employment contract. However, an employer and an employee may in a specific situation make an arrangement for taking holiday which deviates from e.g. the rules on notice.
Taking paid holiday in advance
A new feature is that an employer and an employee are entitled to agree that the employee may take paid holiday at a time when such holiday entitlement has not yet accrued. The holiday taken is deducted from the paid holiday entitlement, which is subsequently accrued by the employee in the holiday year in question. If the employee resigns before deduction has taken place, the employer is entitled to set off the value of the taken and not deducted holiday in the employee’s claim for salary and holiday payment.
Changed time of disbursement of holiday supplement
According to the new Holiday Act, holiday supplement must be paid either at the same time as the holiday begins, or holiday supplement for the period from 1 September to 31 May must be paid together with the May salary, whereas holiday supplement for the remaining part of the holiday year must be paid together with the August salary.
Transitional arrangement
The transition to concurrent holiday takes place with effect from 1 September 2020. In connection with the transition to concurrent holiday a transitional arrangement has been established. The transitional arrangement means that holiday accrued during the period from 1 January 2019 to 31 August 2019 can be taken out during the period from 1 May 2020 to 31 August 2020 in accordance with the present Holiday Act and then in accordance with the new Holiday Act.
Freezing of holiday
Holiday accrued in accordance with the present Holiday Act during the period from 1 September 2019 to 31 August 2020 cannot be taken or paid out. Instead, the holiday funds are to paid into a separate fund, ”Employees’ Fund for Residual Holiday Funds” (Lønmodtagernes Fond for Tilgodehavende Feriemidler) (the ”Fund”), which is to manage and administer the holiday funds. The Fund is set up as a separate financial entity under the Danish Employees’ Capital Pension Fund (Lønmodtagerens Dyrtidsfond).
The employer must calculate holiday and holiday payment accrued during the period for each individual employee as per 31 August 2020. The holiday payment is calculated as holiday allowance with 12.5 % of the salary during the period of accrual. The holiday funds must be reported to the Fund for each individual employee no later than on 31 December 2020.
In connection with reporting to the Fund, the employer may, instead of paying the holiday funds to the Fund, choose to retain the holiday pay in the company, until the deadline for mandatory payment to the Fund, at the latest at the time of the employee’s retirement. If the employer chooses to retain the holiday pay, it is a requirement that the funds are subject to an annual indexation, and the employer must each year no later than on 31 august confirm towards the Fund that the employer still wishes to retain the holiday funds in the company.
The frozen holiday pay is paid by the Fund to the employee when the employee has reached the pensionable age or when the employee has left the labour market, including due to granted early retirement (førtidspension), optional early retirement (efterløn), permanent residence abroad etc. In the event of the employee’s death the holiday funds are paid to the estate of the employee.
Recommendation
We recommend our business clients to examine the provisions in the company’s employment contracts in the light of the new Holiday Act, namely to identify whether the employment contracts contain provisions deviating from the rules on notice of holiday set out in the Holiday Act, because such deviations cannot, as mentioned, be upheld under the new Holiday Act.
Although extra holiday entitlements (feriefridage) are not covered by the Holiday Act, the new Holiday Act and the change of the holiday year may mean that in certain cases it will be prudent also to adjust the provisions of the employment contracts on extra holiday entitlements. The Company also needs to consider whether the new Holiday Act may require changes in the company’s employee handbook, for example in the form of supplementary provisions on taking paid holiday in advance.
For additional information and advice please contact Attorney-at-law Ida Hauge Thaning/iht@nrlaw.dk
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