Denmark Transitioning Between Holiday Systems

Denmark Transitioning Between Holiday Systems

Denmark is in an interim period during which the way employees accrue their holiday allowance will change.

In Denmark, employees are entitled to a 1% holiday allowance, known as ferietillæg, in addition to the standard holiday pay (feriepenge) that they accrue during the calendar year. However, following the passage of the Danish Holiday Act in 2018, a new way of accruing and taking holiday entitlement has been introduced. While the new system will come into effect on 1 September 2020, Denmark is in the process of transitioning between the two regimes, with specific consequences for the way the 1% allowance is handled in the interim.

The Danish Holiday Act

The new version of the Holiday Act enables employees to take the holiday they earn immediately, rather than having to wait to take it during the next holiday year (1 May to the 31 April). Under the new system, which comes into effect from 1 September 2020, employees will, for example, be able to take the holiday they earn in January, as time off in February.

In order to manage the transition and eliminate a situation in which employees earn double holiday pay, a transition period is currently in effect. Introduced on 1 September 2019, the transition will run until 31 August 2020.

Holiday Allowance Accrual

The 1% ferietillæg allowance is accrued on the basis of an employee’s standard holiday pay which is 12.5% of their salary or roughly 2.08 days for every month of employment. Under the previous system, the 1% allowance was prorated and only paid out when the employee took their holiday in the following holiday year - or alternatively, paid out entirely on 1 May along with an employee’s remaining holiday salary.

However, 2019 effectively had two holiday accrual periods: the first under the previous system from 1 January to 31 August, and the second under the transition period from 1 September to 31 December. Accordingly, the ferietillæg payout will be different from previous years.

Transition Period

During the transition period, employees’ 12.5% holiday pay will be held in a Special Holiday Fund. Employees will only be able to claim their accrued holiday pay upon retirement or when they relocate to another country and leave Denmark’s labour market. The ferietillæg 1% allowance is included as part of that Special Holiday Fund and will be claimable, along with the 12.5% holiday pay accrued, upon an employee’s retirement or relocation.

Holiday pay and allowance accrued in 2019 from 1 January to 31 August will be payable as normal. Payroll employees should however pay special attention to the start date of the transition period to ensure compliance.

Holiday Allowance from 1 September 2020

When the new holiday system comes into effect on 1 September 2020, the 1% holiday allowance will remain, and be payable in the following ways:

  • Prorated with the holiday pay that has been held over,

Or,

  • Paid in 2 installments in 2021:
  • In May, including the amount accrued from September to May, and,
  • In August, including the amount accrued from June to August

Learn more about Danish holiday pay, tax, and payroll in activpayroll’s Global Insight Guide to Denmark: the guide includes information and insight into Denmark’s global economic profile, major industrial sectors, and business practices.

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