Main points
- From September 1, 2020, employees with paid salary during vacation can now request a payout of up to three weeks’ holiday pay earned in a transition period.
- The new vacation year runs from September 1, 2020, to August 31, 2021, and the earned 25 days for this vacation year (12 months) can be taken in the period September 1, 2020, to December 31, 2021(16 months).
- This move is an economic initiative aimed at stimulating the Danish economy. The Danish government will be paying the holiday pay on behalf of the companies.
- Employees can request a payout via borger.dk in the period 29 September 2020 to 1 December 2020.
Important information for employers
All accrued vacation pay for the transition year, i.e., September 1, 2019, to August 31, 2020, must be reported to the Danish authorities no later than December 31, 2020.
Please note that any applicable bonuses applicable should be accrued/included in the vacation pay for the period.
Bonus paid in 2021 relating to the transition period to be filed when the amount is known.
The accrued amount can fully or partially be paid to the Danish authorities (Lønmodtagernes Feriemidler) or kept by the company. If the company keeps it, it will be indexed. The index percentage will be published in June 2021 by the Danish authorities. When preparing this information letter, it is still uncertain if companies can pay the accrual as per August 31, 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 August 31, 2021, if they want to keep the accrual or pay it – the deadline for paying is the day after September 1, 2021.
If employees want to have paid vacation days in advance, they must get a written agreement from their employer. It is recommended that employers include this in their employment contract or employee handbook.
Many companies offer additional vacation days. It is important that they follow up on how to manage these in the future and update their contracts accordingly.
Vacation pay to leavers is to be paid during the same month they leave. From now on companies will not receive an invoice for the net vacation pay. They need to use payment instructions from the Danish authorities by logging into virk.dk if not paid automatically via the payroll application’s payment facility (NETS).
The 1% vacation pay (“ferietillæg”) is now to be paid twice a year, i.e., end May 2021 for the period September 1, 2020 –May 31, 2021, and end August 2021 for the period June 1, 2021 – August 31, 2021. Please note that there is no 1% payment for the transition period from September 1, 2019, to August 31, 2020. As an alternative, the 1% can be paid proportionally in connection with vacation taken – very seldom used due to the administration involved.
Companies that pay more than 1% “ferietillæg” must pay the additional amount to the employees for the transition period.
Up to 5 vacation days can be transferred from one vacation year to another if agreed in writing (no change to the old Danish Holiday Act). If no agreement, then the up to 5 days must be paid to the employee.
Vacation days earned before September 1, 2019, if not used in the “mini-vacation period” May 1, 2020, to August 31, 2020, will be transferred to the new vacation year.
Most companies register vacation days taken in one month in the month after. Our recommendation is to ensure that only actual vacation days are registered and reduce work with corrections. The timing difference is applicable for correct calculations of vacation pay accruals handled at that time.
Hourly paid employees also earn the right to 2.08 days’ vacation per month to be taken from the following month. If the payroll period ends between the 1st and the 15th, 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 16th and the end of the month, then the deadline for filing and the payment is the 15th in the month after. The basis for the calculation is the “vacation pay entitled salary” times 12.5%. Hourly paid employees do not receive the 1%.
Companies with collective agreements need to ensure they are following the agreement if different from above.
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