The new Holiday Act part 1: The transition period

As part of the new Holiday Act which comes into force 1 September 2020, the law includes a special transition period which entered into force on 1 January 2019. This interim arrangement ensures a smooth transition from the current rules to the new rules and prevents employees from accruing double holiday. Specifically, the 25 days of holiday, which are accrued in the period before the new arrangement with concurrent holiday enters into force, will be frozen. The frozen assets will as a starting point only fall due when the employee leaves the labour force.

Accruing and taking leave in the transition period

In 2018, holiday was accrued normally to be taken during the holiday year from 1 May 2019 to 30 April 2020.

In a shortened accrual period from 1 January 2019 to 31 August 2019, employees will accrue holiday in the usual way to be taken during a shortened holiday year which runs from 1 May 2020 to 31 August 2020.

From 1 September 2019 to 31 August 2020, employees accrue holiday normally, but the leave will be frozen in a special fund called The Employees’ Fund for Residual Holiday Funds (Lønmodtagernes Fond for Tilgodehavende Feriemidler). Therefore, holiday accrued during this period may not be taken by or paid out to the employee.

On 1 September 2020, the new Holiday Act enters into force. As from this date, employees will accrue and take holiday concurrently. Holiday will be accrued in the holiday year which runs from 1 September 2020 to 31 August 2021 and the holiday may be taken during the leave period from 1 September 2020 to 31 December 2021.

Special rules for new employees on the labour market

Employees who are new on the labour market or who are returning during the transition period are in a special situation. They have not accrued much holiday to take in 2020 and for a certain period, they only accrue holiday that will be frozen. This group of employees is therefore covered by special rules.

An employee who has accrued less than 8.3 paid days of holiday from 1 January 2019 to 31 August 2019 and who accrues the right to frozen holiday in the period from 1 September 2019 to 31 December 2019 is therefore entitled to take up to 8.3 days of so-called fund holiday (fondsferiedage) with frozen assets from 1 May 2020 to 30 September 2020. These days of fund holiday will be deducted from the frozen assets accrued in the period from 1 September 2019 to 31 August 2020.

Resignation during the transition period

If employees resign during the freezing period from 1 September 2019 to 31 August 2020, the companies should make sure to report the accrued holiday correctly to FerieKonto or Feriepengeinfo.

• As for salaried employees who receive holiday with pay, the companies must pay the accrued holiday to FerieKonto or Feriepengeinfo and indicate which part of the holiday allowance that relates to the freezing period.
• As for hourly-paid employees who receive holiday allowance during leave, the companies must report and pay to FerieKonto or Feriepengeinfo, as usual.

FerieKonto or Feriepengeinfo will automatically make sure that the holiday allowance is forwarded to the new Fund for Residual Holiday Funds.

Reporting during the transition period

How companies should report holiday during the transition period from 1 September 2019 to 31 August 2020 depends on the type of the employee in question:

• As for salaried employees who receive holiday with pay and who are employed during the whole period, the companies must report 12.5 % of the eligible salary directly to the Fund for Residual Holiday Funds.
• As for hourly-paid employees who receive holiday allowance, the companies must continue to report and pay to FerieKonto or Feriepengeinfo as usual. FerieKonto or Feriepengeinfo automatically forwards the information to the Fund for Residual Holiday Funds.

Companies reporting to the fund must do so no later than 31 December 2020. The reporting only relates to holiday subject to the current Holiday Act and therefore, rights to further holiday or special holidays (feriefridage) are not covered

IUNO’s opinion

The new Holiday Act introduces substantial changes to the entire holiday system. Even though the new holiday arrangement with concurrent holiday does not enter into force before 1 September 2020, transitional rules apply from 2019, which the companies should be aware of.

IUNO recommends that companies already start preparing for the changes by informing their employees of the upcoming changes, updating processes and systems relating to holiday, adjusting employment contracts, policies, termination letters etc. Companies also need to consider whether they want to handle the frozen assets themselves or transfer them to the Fund for Residual Holiday Funds – we focus on this topic in our next newsletter on the new Holiday Act.

Throughout 2019, we focus on the new Holiday Act and the substantial changes which the companies must consider. We also report the latest news regarding this topic.