New Danish Holiday Act in 2020

In 2018 the Danish Parliament, Folketinget, adopted a new Holiday Act. The new Act introduces the concept of ”concurrent holiday”, changes the holiday year and introduces a transitional arrangement that will apply for a number of years. These changes are significant and will impact the liquidity of employers for many years and will also change the managing of holiday pay in relation to the financial reporting.

The Holiday Act will come into force on 1 September 2020. However, the change will affect the accrual of holiday already from 1 January 2019. Moreover, there are several administrative systems and internal policies that employers should address before the Act becomes effective.
 

Why the need to change the present system?

The large time variation between accrual of holiday (calendar year) and the actual holiday (following 1 May to 30 April) in the current Holiday Act is in violation of EU law. This issue relates especially to new employees in the labour market, who under the present Danish system may have to wait up to 16 months from their employment date and to their taking of the accrued paid holiday.

The new rules

As from 1 September 2020 the holiday year is changed to run from 1 September to 31 August. The concept of concurrent holiday is introduced at the same time according to which the employee currently accrues and takes holiday in the same period. Basically this means that in the period from 1 September to 31 August the employee will both accrue and take 25 holidays with pay. However, the legislature has decided to determine a period for taking holiday which runs from 1 September to 31 December in
the following year (16 months).

The change of the holiday year is necessary as holiday is accrued successively during the holiday year. A holiday year beginning on 1 September will therefore to the widest possible extent mean that the holiday is accrued at the time when Danes take their holiday.

There is no change to the five weeks of holiday accrued per year, and neither is there any change in the possibility of taking either holiday with pay or holiday with holiday allowance.

In future the employees will in principle begin their holiday year without any accrued holiday. Subsequently, the 25 holidays with pay will accrue at 2.08 day per month during the holiday year. For example, in October the employee will have only 2.08 holidays at his/her disposal. If the employee desires to take a week’s autumn holiday in October, the employee will have to make an agreement his/her employer that he/she takes holiday in advance. Consequently, the new Holiday Act will provide other rules for set-off of holiday against salary.

Accordingly there will be a number of significant changes in addition to the actual change of the holiday year and the transition to concurrent holiday, including monthly settlement of holiday allowance to Feriekonto (Danish holiday account), automatic payment of the fifth holiday week if not taken or agreed to be carried forward, changed rules for payment of holiday bonus, etc.
 

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