New Holiday Act in the making

In 2015, the government appointed a committee which recently published a report and a draft of a new Holiday Act.

The purpose of the new rules is to ensure that all employees can take paid leave in the same year as they accrue it. If the draft of the new Holiday Act is passed in its current form, it will result in several substantial changes, including:

• Leave will be accrued in the period from 1 September to 31 August (12 months) and the accrued leave can be taken in the leave period from 1 September in the same year and until 31 December in the subsequent year (16 months). Thus, the proposal introduces concurrent leave with an extended possibility to take the leave.

• The time of payment of holiday allowance is changed. In the future, the payment may take place either while the employees take their leave or, alternatively, twice a year on 31 May and 31 August. It will therefore no longer be possible to pay holiday allowance in the beginning of the leave period.
  
  
• If the employee is prevented from taking holiday, up to four weeks’ holiday must be transferred to the next leave period. This differs from the rules today where holiday allowance is paid out in cases where the employee is prevented from taking holiday.

• The employer and the employee can arrange that accrued and untaken holiday that exceeds four weeks can be paid out or transferred. If this is not done by the end of the leave period, the leave will be paid out to the employee.

• Agreements on shortened notice require an individual arrangement in a current, specific situation. Contracts of employment can therefore no longer contain a general provision regarding a shortened notice for holiday leave.

• A set of rules will ensure a transition period from the old to the new holiday regime.
  
  

We have reviewed the most important changes in the proposal.

A new holiday year and concurrent holiday

Today, employees accrue leave during the calendar year which runs from 1 January to 31 December. The leave can then be taken during the holiday year which runs from 1 May to 30 April in the following year. This is called deferred holiday. With the deferred holiday, new employees could have to wait up to 16 months before they have accrued and can take five weeks’ paid holiday leave.

With the new Holiday Act, however, leave will be accrued in the period from 1 September to 31 August (the holiday year). The employees will then be entitled to take the leave during a period of 16 months from 1 September in the same year to 31 December in the subsequent year (the leave period). With the new continuous earning of leave, leave accrued in March, for instance, can be taken as early as in April. Thus, the new arrangement introduces what is called “concurrent holiday” which aims to meet new employees’ need for paid leave.

Transition from old to new rules

According to the proposal, the new arrangement with concurrent holidays will enter into force on 1 September 2020. In order to prevent employees from accruing double holiday, the committee has proposed that the 25 days of holiday which are accrued in the interim period before the new arrangement enters into force are to be frozen in a special new holiday fund. The frozen assets will only fall due when the employee leaves the labour force.

The draft on the new Holiday Act contains particular transitional rules for newly hired employees and other employees without accrued holiday leave. The basic idea is that all employees will be entitled to take leave in the same year as they accrue it.

IUNO’s opinion

The proposal does not achieve a simplification of the current rules that one could have hoped for, and it looks as if the Holiday Act will remain quite complex in the future. Additionally, the proposal does not solve the problem that arises when a new employee wants to take three weeks’ leave in July during his/her first working year.

If the committee’s proposal for a new Holiday Act is adopted without changes, the employers should ensure that their contracts of employment, policies, and processes comply with the new rules.

The Danish parliament will begin its political negotiations of the proposal in September this year and the new Holiday Act is expected to be passed before Christmas. IUNO follows the situation closely and we will be posting when there is any news of the new Holiday Act.

[Report no. 1568 on a new Holiday Act and the transition to concurrent holidays]