Employers can pay into the frozen holiday fund from 1 February 2021

From 1 February 2021, employers can voluntarily pay the frozen holiday funds earned in the period 1 September 2019 to 31 August 2020 to the Employees ‘Fund for Receivable Holiday Funds (Employees’ Holiday Funds). The Employees’ Holiday Funds is a fund that manages the holiday pay earned in the transition year prior to implementation of the new holiday law.

The transition year ran from 1 September 2019 to 31 August 2020 and as holiday funds relating only to the transition year need to be reported and paid into the Employees’ Holiday Funds, it is important that the salary has been accrued correctly for the transition period. The deadline for reporting holiday pay for the period expired on 31 December 2020, and all companies should have been notified of this via e-Box. However, it is still possible to post-report after the deadline of 31 December 2020, for example, if the holiday pay calculation could not be undertaken on variable salary components before 31 December 2020. Post- reporting must be done via eInkomst at the Danish Tax Agency. If an employer corrects the reports or makes a subsequent lawful report after 1 February 2021, employees will receive a letter notifying them of the change.  The employee must accept any changes before it takes effect on the saved holiday funds.

Voluntary payments can also be made on an ongoing basis after 1 February 2021 and it is possible for the employer to choose to pay in for all, or only some employees, at the employer’s discretion. An Employer can, for example, choose to pay the holiday pay for employees over a certain age, e.g., 55 years. An Employer could also choose to pay the holiday pay for only those employees who leave employment.

Payment of the frozen holiday funds must be made via the self-service access at www.virk.dk/feriemidler.

Log in to the self-service access is done with NemID, where there will be a tab for voluntary payment. Here, the employer must, among other things, state what amount is being paid.

From July 2021, employers will, on an annual basis receive a notification of payment from the Employees’ Holiday Funds, and employers are legally obliged to make the payment. The payment notification is made up of holiday funds for employees who are entitled to holiday pay, for example employees who have reached the state pension age or who have left the Danish labor market. In the same connection, employers will also be informed about how to proceed if the employer still wishes to keep the remaining holiday funds in the company, and how the employer should report this.

Frozen holiday funds that the employer reports to the Employees’ Holiday Funds will bear interest (index) from 1 September 2020, regardless of when the fund receives the report and the payment. The indexed amount is calculated for the first time on 31 May 2021. Thereafter, the indexation is calculated every year before the end of July. The Employees’ Holiday Funds will provide further information regarding this.

If an employer does not want to keep the frozen holiday funds and wants to avoid indexing them, the holiday pay must be paid into the Employee’s Holiday Funds. That is, if the frozen holiday funds are paid in on 1 April 2021, the indexation will be calculated from 1 September 2020 until and including 1 April 2021.

On 15 June 2020, the political majority entered into an agreement to advance the payment of the frozen holiday funds as part of financial assistance measures for COVD-19. The law was passed on 17 August 2020 and many employees have already been paid part of the frozen holiday funds earned during the period 1 September 2019 to 31 March 2020, corresponding to three weeks’ holiday. From March 2021, it will be possible for employees to have the last two weeks of frozen holiday funds paid out.

The employer’s obligation to report and calculate receivable holiday funds has not changed as a result of the financial assistance measures. Employers can still choose whether the value of the earned holiday funds is retained in the company until the employee reaches the state pension age or for other reasons leaves the labor market, or whether the earned holiday funds are paid into the fund prior to this.

If you have questions about reporting and paying in holiday funds, for example whether the bonus should be included or any other questions, please contact Mette Klingsten Law firm.