About the new holiday law
On September 1, 2020, we will have a new holiday law in Denmark. We are doing this because the current holiday law does not live up to the rules of the EU Labor Directive. The directive states that all employees are entitled to four weeks of paid vacation per year, which is not the case for graduates, for example, under the existing holiday law.
In this blog post, we'll guide you through what this means for your employees and you as an employer.
The new holiday law introduces the principle of concurrent holiday. This means that your employees now take and earn vacation at the same time. This means that your employee can take their vacation as early as the month after it is earned. This means that the new holiday law is first and foremost a helping hand for the newly educated, long-term unemployed and those on long-term sick leave, who no longer have to wait up to a year and a half before they can take paid vacation.
The new holiday law also allows your employees to take vacation time that they have not yet earned. However, you as an employer must give permission for this. In the event that your employees take vacation in advance, you must calculate a credit for your employee, which is subsequently offset in the same period as the employee earns vacation.
Under the new holiday law, your employees will continue to be entitled to a 1% holiday allowance.
As in the current Holiday Act, you as an employer can either choose to pay the holiday supplement at the same time as the employee takes vacation, or you can choose to pay the holiday supplement together with the salary twice a year, namely with the salary in May and August.
New holiday year
The new holiday law introduces a new holiday year. The vacation is earned in the period September 1 to August 31, i.e. over 12 months, while the employee has the option to take the vacation in September 1 to December 31, i.e. over 16 months. Thus, the new holiday law creates greater flexibility in terms of when you want to take your vacation.
Carrying over hindered vacation
If one or more of your employees are prevented from taking their vacation, for example due to illness, maternity leave or similar, up to four weeks of vacation will be transferred to the next vacation period. Unless otherwise agreed, the company must transfer the fifth vacation week to the employee on December 31st.
Before we move to the new holiday scheme, there will be a transition period starting September 1st this year. Without the transition period, your employees would otherwise have a full year of accrued vacation. This extra vacation money will be frozen in a fund and paid out to employees when they leave the labor market again.
How the new holiday law affects your employees
For employees who are new to the labor market, the new holiday law, as previously mentioned, means that all employees are entitled to paid holidays already in their first year of employment.
For those employees who already have a few or more years in the labor market, the new holiday law means a form of extra savings. During the transition year, which starts on September 1 this year, holiday pay will be frozen in a fund. The money is invested, earns interest and is paid out on the day people retire.
How the new holiday law affects you as an employer
In the transition year, you as an employer must report vacation for all company employees, and already in the transition year, there are changes to how the company must report vacation.
During the transition year, the company must pay holiday pay to Lønmodtagernes Feriemidler. You can read more about this here
If the company uses FerieKonto or a holiday fund, the company must pay in holiday pay more often. As employees earn vacation time on an ongoing basis, they need to have their vacation money available faster than before.
You can get an overview of reporting, employee types and tax rules here
A to-do list for you as an employer
- Make sure you have updated employment contracts and personnel policies to comply with the new holiday law
- Please note that your payroll and HR systems will update the employee's holiday accounts on a monthly basis
- Please note that when the new holiday law comes into force on September 1st, there will be new deadlines for reporting and payment to Feriepengeinfo
/ Qred Business Loan