Act on the Management and Administration of Accrued Holiday Entitlements

Act on the Management and Administration of Accrued Holiday Entitlements

Hereby is promulgated Act No. 58 of 30 January 2018 on the management and administration of accrued holiday entitlements with the amendments that follow from Section 3 in Act No. 496 of 1 May 2019, Section 22 in Act No. 1559 of 27 December 2019, Section 1 in Act No. 1223 of 21 August 2020, Section 10 in Act No. 2202 of 29 December 2020, Section 1 in Act No. 465 of 20 March 2021, Section 5 in Act No. 1538 of 12 December 2023 and Section 2 in Act No. 1539 of 12 December 2023.

Chapter 1 Purpose and Scope

Section 1. The purpose of this Act is, in connection with the transition to a new holiday system, cf. Section 48, subsection 2, of the Holiday Act, to secure employees' claims to accrued holiday entitlements and to give employers the opportunity to retain the accrued holiday entitlements until they fall due for payment.

Subsection 2. To secure the purpose of this Act, the Employees' Fund for Accrued Holiday Entitlements (the Fund) is established as a separate economic entity in the Employees' Price Compensation Fund, which handles the payment, management and disbursement of the funds.

Subsection 3. Accrued holiday entitlements, cf. subsection 1, are understood to mean holiday pay calculated according to Section 2.

Subsection 4. Upon reporting in accordance with Section 3, the Fund steps into the shoes of the employee's reported claim to accrued holiday entitlements, cf. subsection 3, against the employer, whereupon the employer may only pay with releasing effect to the Fund and the employee may only direct their claim against the Fund. Until the Fund has stepped into the employee's reported claim to accrued holiday entitlements, the claim is a matter between the employee and the employer, which prescribes according to Section 4 of the Statute of Limitations Act.

Chapter 2 Calculation and Reporting of Accrued Holiday Entitlements

Section 2. Holiday days and holiday pay accrued in the period from 1 September 2019 to 31 August 2020 under the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015 as amended by the simultaneously submitted proposal for an Act on Holidays, are calculated for each individual employee as of 31 August 2020.

Subsection 2. The holiday pay is calculated as holiday allowance of 12.5% of the salary in the accrual period, cf. Section 26 of the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015 as amended by the simultaneously submitted proposal for an Act on Holidays, subject however to subsections 3 and 4.

Subsection 3. For an employee who is employed on a monthly basis or for a longer period, and who during the period of employment mentioned in subsection 1 has had leave under the Parental Leave Act, where the employer is required to pay partial salary, the holiday pay for the leave period is calculated on the basis of the employee's usual salary in the last 4 weeks where full salary was paid.

Subsection 4. If an employee with a right to holiday with pay according to a collective agreement has a claim for pension contributions on holiday allowance upon termination, these funds are included in the calculation according to subsection 1.

Section 3. Reporting to the Fund of accrued holiday entitlements calculated according to Section 2 must be made for each individual employee no later than 31 December 2020. The employer may, in the event of excusable errors, raise an objection to the reporting in the same manner as specified in Section 4, subsection 3, unless the employee has received early payment of the employee's remaining accrued holiday entitlements, cf. Section 17 a, subsections 1 and 3. In that case, the employer cannot reduce the reported accrued holiday entitlements after 28 February 2022.

Subsection 2. The reporting is made by the employer with whom the accrual of the accrued holiday entitlements took place. For accrued holiday entitlements that have been reported to FerieKonto in accordance with Section 28 of the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015, or that have been reported to a private holiday fund in accordance with a collective agreement, the reporting is, however, made by FerieKonto and the private holiday fund, respectively.

Subsection 3. The reporting must for each individual employee contain information about

1. name and CPR number or other unique identification,
2. the amount to which the accrued holiday entitlements are calculated, and
3. the number of saved holiday days.

Subsection 4. The Fund may reject the reporting if the employer cannot, upon demand, document that the accrued holiday entitlements are calculated in accordance with Section 2.

Subsection 5. If the employer fails to make the reporting in accordance with subsections 1-4, the Fund may order the employer to immediately submit the missing information. If the employer, despite such an order, fails to submit the missing information, the Fund may decide that the employer must make payment of accrued holiday entitlements within a deadline of 4 weeks, whereby the employer loses the right under Section 6, subsection 1, to retain the funds. The reminder letter may be subject to a fee.

Subsection 6. In situations where an employee reports a claim for salary and the like accrued in the period from 1 September 2019 to 31 August 2020 to the Employees' Guarantee Fund, the Employees' Guarantee Fund reports the employee's total claim to accrued holiday entitlements according to Section 2, cf. Section 4 a of the Act on the Employees' Guarantee Fund, cf. Consolidation Act No. 686 of 20 June 2011, as amended by Act No. 58 of 30 January 2018 and Act No. 124 of 6 February 2019. Reporting from the Employees' Guarantee Fund replaces any previous reporting from the employer.

Subsection 7. The Minister of Employment shall establish detailed rules on the reporting, including its content and form, and detailed rules on the collection of an administrative contribution upon reporting a claim that may be rejected according to subsection 4, including the collection of fees for reminder letters and the level thereof. The Minister of Employment may also establish detailed rules that the employer bears costs and losses associated with changes to the reporting if the employer changes the reporting for many employees after the deadline, cf. subsection 1.

Subsection 8. The Minister of Employment may additionally establish detailed rules on the procedure and conditions for sanctions and enforcement in connection with insufficient reporting of accrued holiday entitlements, cf. subsection 5.

Section 4. The Fund notifies the employer and subsequently the employee of the reported information and the like, cf. Section 3, Section 17 a, subsection 2, second sentence, and Section 28, subsection 3, second sentence.

Subsection 2. Prior to notifying the employer according to subsection 1, the Fund must investigate whether the employer has made complete reporting for all employees. If the Fund identifies employees for whom it may be assumed that no information about accrued holiday entitlements has been reported, the Fund shall hear the employer and the employee regarding the missing reporting.

Subsection 3. An employee who disagrees with a calculation according to Section 3 must raise an objection to the employer no later than 30 June 2025. When informing the Fund of the objection, the employee must document that the employee and the employer agree on a different calculation of the accrued holiday entitlements, or document that the employee has taken the steps mentioned in Section 35, subsection 2, of the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015.

Subsection 4. The Minister of Employment establishes detailed rules on the Fund's notification of employers and employees about the reported information, including the administrative handling thereof, the Fund's duty of investigation and possible objections.

Section 5. FerieKonto and private holiday funds must transfer to the Fund the accrued holiday entitlements that have been reported to the Fund, cf. Section 3, subsection 2, second sentence, no later than 31 December 2020, subject however to subsection 3. Accrued holiday entitlements that an employer has reported to FerieKonto or a private holiday fund, but has not paid to them in violation of the rules, may be demanded by the Fund to be paid within 4 weeks with interest added according to Section 28, subsection 2, of the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015.

Subsection 2. Accrued holiday entitlements that are reported to the Fund after 31 December 2020, but which should have been reported and paid to the Fund no later than 31 December 2020, cf. Section 3, subsection 2, second sentence, may be demanded by the Fund to be paid within 4 weeks with interest added according to Section 28, subsection 2, of the Act on Holidays, cf. Consolidation Act No. 1177 of 9 October 2015.

Subsection 3. No later than 1 April 2020, FerieKonto must transfer the holiday funds that have been paid to FerieKonto for the period from 1 September 2019 to 31 December 2019 to the Fund.

Chapter 3 Employer's Payment

Section 6. After the reporting according to Section 3, the employer pays accrued holiday entitlements for each employee to the Fund, unless the employer indicates that it wishes to retain the accrued holiday entitlements in the company until they fall due for payment according to Sections 8 and 9, subject however to Section 3, subsection 5, second sentence.

Subsection 2. An employer who has not paid all accrued holiday entitlements to the Fund may at any time voluntarily pay an employee's accrued holiday entitlements plus the annual indexations made and proportional indexation up to and including the month in which the deadline for payment is set, cf. subsection 3 and Section 7.

Subsection 3. Holiday funds paid according to subsection 2 are indexed according to Section 7, subsections 1-3. The indexation is proportional for the period from the last indexation according to Section 7, subsections 1 and 2, up to and including the month in which the deadline for payment is set, cf. Section 7, subsection 3.

Subsection 4. Upon an employer's full payment of an employee's accrued holiday entitlements with the addition of indexation, cf. subsection 3 and Section 7, the employer's obligations towards the Fund regarding the said employee cease.

Section 7. The Fund notifies the employer of the size of the indexation of the accrued holiday entitlements.

Subsection 2. The Minister of Employment or the person whom the Minister of Employment authorizes to do so shall each year no later than 31 May, however in 2021 before early payment of holiday funds according to Chapter 5 a, set the size of the indexation that employers must use to regulate the accrued holiday entitlements that employers must pay to the Fund.

Subsection 3. Upon payment according to Section 6, subsection 2, immediate collection, collection according to Section 9, subsection 1, and Section 10, and reporting to the Employees' Guarantee Fund according to Section 22, proportional indexation is calculated for the period from the last indexation according to Section 7, subsections 1 and 2, up to and including the month in which the deadline for payment is set, or in which reporting to the Employees' Guarantee Fund takes place, cf. Section 22, subsection 1. The proportional indexation is calculated using the most recently set indexation rate, cf. subsection 2.

Subsection 4. The Minister of Employment establishes detailed rules on the Fund's notification to employers.

Section 8. The Fund makes a decision each year before the end of July regarding the employer's payment of accrued holiday entitlements for employees who reach the public pension age according to Chapter 1 of the Act on Social Pension in the period from 1 March in the decision year to the end of February in the following year. In 2021, a decision is also made regarding the payment of other accrued holiday entitlements for employees who have reached the public pension age before 1 March 2021. Payment must be made no later than 1 September in the decision year.

Subsection 2. The Fund makes a decision each year before the end of July regarding the employer's payment of accrued holiday entitlements for employees who, in the period from 1 March in the preceding year to the end of February in the decision year, have received payment of accrued holiday entitlements according to Section 15, subsection 2, or where the employee has died during this period. The Fund also makes a decision each year before the end of July regarding the employer's payment of accrued holiday entitlements for employees whose total reported accrued holiday entitlements at this time do not exceed DKK 1,500. In 2021, a decision is also made regarding the payment of accrued holiday entitlements for employees who died before the end of February 2021. Payment must be made no later than 1 September in the decision year.

Section 9. Accrued holiday entitlements with an employer fall due for payment to the Fund, regardless of Section 8, no later than when the employer's business is dissolved, ceases, or abandons the connection to Denmark that triggered the registered claims to accrued holiday entitlements. Accrued holiday entitlements also fall due in the event of the employer's bankruptcy or the employer's death, if a decision is made on insolvency proceedings or if the estate is closed by settlement without estate administration. The employer must also pay the accrued entitlement upon winding up their activities.

Subsection 2. In connection with the total or partial transfer of a business, the transferor and the acquirer may jointly notify the Fund that the acquirer assumes the transferor's obligation regarding accrued holiday entitlements towards the Fund.

Section 10. If an employer fails to pay accrued holiday entitlements that have fallen due, cf. Section 3, subsection 5, second sentence, Section 5, subsection 1, second sentence, and subsection 2, and Sections 8 and 9, the Fund must, if this has not already happened, send a reminder letter to the employer demanding payment of all accrued holiday entitlements within 4 weeks. The requirement for a reminder letter does not apply, however, in the event of falling due due to the employer's bankruptcy or the employer's death, if a decision is made on insolvency proceedings, or if the estate is closed by settlement without estate administration. The reminder letter may be subject to a fee.

Section 11. The Minister of Employment establishes detailed rules on employers' payment of accrued holiday entitlements according to Sections 3, 5, 6 and 8-10, including on the time of payment and temporary exclusion of the possibility of voluntary payment and on the information that must accompany the payment.

Subsection 2. The Minister of Employment may establish detailed rules on the procedure and conditions for sanctions and enforcement in connection with insufficient payment of accrued holiday entitlements, including on the collection of fees for reminder letters according to Section 10 and the level thereof.

Chapter 4 Employee's Claim and Annual Regulation

Section 12. An employee's claim to accrued holiday entitlements under this Act includes reported accrued holiday entitlements, cf. Section 3, plus the attributed regulation according to Section 13, subject however to Section 17 a, subsection 2, and Section 28, subsection 3.

Section 13. The Fund's result is attributed once a year to each individual employee's accrued holiday entitlements in proportion to their share of the total assets, except continuously upon payment, cf. subsections 2 and 3.

Subsection 2. Upon payment according to Section 15, the accrued holiday entitlements are regulated for the employees who are to receive the funds with the Fund's result at the time of the Fund's calculation of payment in proportion to the individual's share of the total assets in the Fund.

Subsection 3. Upon payment according to Section 17 a, subsection 3, the accrued holiday entitlements are regulated with the Fund's result at the time of application. If changes are made to the employer's reporting according to Section 3, subsection 1, later than 1 year after the Act enters into force, and this results in changes to the employee's claim pursuant to Section 12, the regulation is, however, made at the time of the Fund's calculation of payment.

Section 14. The Fund provides each individual employee with an annual balance statement of the accrued holiday entitlements including the annual regulation, cf. Section 13, regardless of whether the accrued holiday entitlements are held by the employer or have been paid to the Fund.

Subsection 2. The Minister of Employment establishes detailed rules on the content and formal requirements for balance statements according to subsection 1.

Chapter 5 Payment to Employee

Section 15. The Fund pays accrued holiday entitlements with the addition of regulation, cf. Section 13, subsection 2, to the employee when the employee has reached the public pension age according to Chapter 1 of the Act on Social Pension, subject however to subsections 2-5. The employee and the Fund may agree that accrued holiday entitlements are paid at a later time.

Subsection 2. The Fund pays accrued holiday entitlements to employees who have left the labor market upon application, when the employee

1. has been granted early pension according to Chapter 3 of the Act on Social Pension,
2. has been granted senior pension according to Chapter 3 a of the Act on Social Pension,
3. transitions to early pension according to Chapter 3 b of the Act on Social Pension,
4. has transitioned to unemployment benefits pursuant to the rules in Chapter 11 a of the Act on Unemployment Insurance,
5. has been granted flexicurity benefits according to Chapter 2 of the Act on Flexicurity Benefits,
6. has received old-age pension established as part of an employment relationship, or
7. has taken permanent residence abroad.

Subsection 3. Upon an employee's death, the Fund pays accrued holiday entitlements to the estate.

Subsection 4. The Fund must pay accrued holiday entitlements to employees whose total accrued holiday entitlements at the time of reporting do not exceed DKK 1,500.

Subsection 5. The Fund is not obliged to fulfill claims for payment of accrued holiday entitlements according to subsections 1, 2 and 4 before 1 October 2021.

Subsection 6. The Fund may demand repayment of accrued holiday entitlements paid to the employee who has no claim to them.

Section 16. An employee's claim for payment according to Section 15, subsections 1 and 3, prescribes as claims covered by Section 4 of the Statute of Limitations Act, but no earlier than 5 years after the calculation of the employee's accrued holiday entitlements has become final, cf. Section 4.

Section 17. The Minister of Employment establishes detailed rules on the payment of accrued holiday entitlements, cf. Section 15.

Chapter 5 a. Early Payment of Holiday Funds

Section 17 a. The Fund may, after an application round in 2020, make an early payment of holiday funds that are covered by Section 48 a, subsection 2, of the Act on Holidays, cf. Consolidation Act No. 1025 of 4 October 2019, and accrued in the period from 1 September 2019 to 31 March 2020. Holiday pay in connection with the taking of special fund holiday days according to Section 28 is deducted from the payment. Holiday allowance, salary during holiday and holiday supplement, which relate to a salary period spanning the month-end from August to September 2019, are deemed accrued in September 2019. Holiday allowance, salary during holiday and holiday supplement, which relate to a salary period spanning the month-end from March to April 2020, are deemed accrued in April 2020.

Subsection 2. Early payment according to subsection 1 is deducted from the employee's claim against the Fund for accrued holiday entitlements according to Section 12. Prior to hearing the employee according to Section 4, subsection 1, the Fund must investigate whether the employee has received early payment of holiday funds according to subsection 1, which must be deducted in the calculation of the employee's accrued holiday entitlements.

Subsection 3. The Fund may, after an application round in 2021, make an early payment of an employee's accrued holiday entitlements according to Section 12.

Subsection 4. Early payment according to subsections 1 and 3 and deduction according to subsection 2 are of no significance for the employer's duty to report, calculate and pay accrued holiday entitlements according to Chapters 2 and 3. Deduction from the employee's claim to accrued holiday entitlements, cf. subsection 2, must not be included in the calculation of what the employer must pay to the Fund.

Subsection 5. Early payment according to subsections 1 and 3 is included in the calculation of the employee's taxable income to the extent that it replaces holiday with pay or holiday allowance in holiday card schemes without holiday funds. The payment is not included in the calculation of the employee's taxable income to the extent that it replaces other holiday allowance. The payment mentioned in the first sentence is classified as A-income, cf. Section 43 of the Withholding Tax Act, and is included in the basis for labor market contribution according to the Labor Market Contribution Act. Section 49 B of the Withholding Tax Act applies correspondingly.

Subsection 6. Early payment of holiday funds according to subsections 1 and 3, which originates from a payment from the Employees' Guarantee Fund to the Employees' Fund for Accrued Holiday Entitlements according to Section 8 b of the Act on the Employees' Guarantee Fund, is not included in the calculation of the employee's taxable income.

Subsection 7. The Fund may demand repayment of early paid holiday funds according to subsections 1 and 3, which the recipient has no claim to. It is not a condition for the recovery that the recipient was aware at the time of payment that they had no claim to early payment according to subsections 1 and 3.

Subsection 8. An early payment of accrued holiday entitlements according to subsection 1 may be chosen by the employee to be treated tax-wise as if the payment had taken place at the time of the application for payment, and thus that the payment has tax effect at the time of application, provided that more than 14 days have passed from the time of application to the time of payment. A request for this must be received by the Danish Customs and Tax Administration no later than 1 July 2021.

Subsection 9. An early payment of accrued holiday entitlements according to subsection 3 may be chosen by the employee to be treated tax-wise as if the payment had taken place at the time of the application for payment, and thus that the payment has tax effect at the time of application, provided that more than 14 days have passed from the time of application to the time of payment. A request for this must be received by the Danish Customs and Tax Administration no later than 1 December 2021.

Subsection 10. The Minister of Employment may establish detailed rules on early payment of holiday funds according to subsections 1 and 3, including rules for application, application deadline, payment, the Fund's administration and control. The Minister of Employment may also establish detailed rules on recovery, including that there should be no repayment of holiday funds that the employee had no claim to, cf. subsection 3, under a specifically set de minimis threshold.

Section 17 b. Claims to early payment of holiday funds according to Section 17 a cannot be used for set-off against debt.

Subsection 2. Early payment according to Section 17 a does not enter into the allocation or calculation of, or cause deduction in, maintenance benefits or other income-dependent public benefits for the benefit recipient, their spouse or cohabitant, or other household members. The payment may be disregarded up to and including the year 2023. A person who has received holiday funds according to Section 17 a has a duty to document having received the holiday funds in connection with the application and calculation of a public benefit in which the holiday funds should not be included.

Subsection 3. The Minister of Employment may establish detailed rules on early payment of holiday funds according to Section 17 a in relation to maintenance benefits or other income-dependent public benefits, cf. subsection 2.

Section 17 c. The Fund may take state loans for early payment of holiday funds according to Section 17 a.

Subsection 2. The loan is interest-bearing according to Section 7, and the interest is attributed to the principal.

Subsection 3. When an employee's accrued holiday entitlements are paid in, a repayment of the loan is made corresponding to the proportional share of the paid holiday funds of the total accrued holiday entitlements for the employees corresponding to the payment. The attribution of interest for a part of the total outstanding amount stops at the time when the Fund receives the corresponding payment from an employer.

Subsection 4. The State's share of holiday funds, which have been paid by FerieKonto or private holiday funds to the Fund up to 31 December 2020, is repaid when the employee's individual accrued entitlements...