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Payment of frozen holiday pay: what has changed for Danish employers?

Written by
Norrbom Vinding, the largest labour and employment law practice in Scandinavia and the market leader in Denmark.
The Danish parliament has passed a bill on the payment of up to three weeks’ holiday pay that was frozen as part of the transition to the new holiday scheme.

As part of the transition to the new Danish holiday scheme, it was decided that holiday pay earned in the transition year should be frozen until the time when the employee reaches the state pension age or leaves the Danish labour market.

In June, however, a majority in the Danish Parliament, ‘Folketinget’, agreed to pay out three weeks of this frozen holiday pay. Under the bill, among other things, employees can request for payment of the holiday they have earned in the period from 1 September 2019 to 31 March 2020 from the Employees’ Holiday Funds. The individual employee will be able to request payment on the borger.dk website from October 2020 to the end of November 2020. The payment of the three weeks of frozen holiday pay will be made on the basis of the salary information reported in the eIncome Register.

Reporting deadline still 31 December 2020

For employees with holiday pay, the employer regularly reports and pays the frozen holiday pay into the employee’s holiday account (FerieKonto) or a private holiday fund. For employees entitled to holiday with pay, the deadline for reporting holiday is 31 December 2020. The bill states that early payment of frozen holiday pay from the Employees’ Holiday Funds will not affect the employers’ obligation to calculate and report holiday pay for the transition year no later than 31 December 2020.

The payment also does not change the fact that the employer will continue to be able to retain the holiday pay for employees entitled to holiday with pay who are still employed on 1 September 2020. In return for payment of an annual indexation, the employer will be able to retain this holiday pay until it must be paid into the Employees’ Holiday Funds at the time when the employee reaches the state pension age or leaves the Danish labour market.

For an employer who wants to pay the holiday pay into the Employees’ Holiday Funds instead, it was originally planned that the holiday pay could be paid at the same time as the employer reports it in the eIncome Register. The time for payment has now been postponed and it appears from the bill that a new date will be set. It also appears that the first ordinary payment of holiday pay will continue to take place in July and August 2021, when the employer must also state for the first time whether it wishes to retain or pay the holiday pay.