The holiday supplement is a compensation for employees entitled to paid leave. This compensation equates to 1% of the salary earned during the holiday accrual year and must be paid no later than when the holiday is taken. However, it can also be paid out twice a year on a fixed basis. This solution is often chosen by employees, as it can help to ease the administrative burden.
Are you a salaried employee, in a permanent job on a monthly or longer-term basis? Are you entitled to full pay on public holidays not falling on Sundays and sick days? Then you are also entitled to paid annual holiday.
In this article, we have gathered information on holiday supplement that is important for both employees and employers in Denmark.
Who is entitled to pay during holiday
To be entitled to holiday pay you must have permanent employment on a monthly basis or for a longer period, while also being entitled to full pay on public holidays that fall on weekdays and sick days. If these conditions are not met, you may be exempt from the rules regarding pay during holidays.
Holidays, paid holiday and compensation
For each month you are employed at a company during the holiday year (1st September-31st August), you accrue the right to 2.08 days of paid holiday. In addition, you are always entitled to take 25 days of holiday per year, regardless of whether you have earned the right to payment or not. Once you have accrued the right to paid annual holiday, your salary will be equivalent to your usual and foreseeable salary at the time of your holiday. To this must be added the value of any benefits in kind that are not available to you during your holiday. If you are paid commission, you are entitled to compensation for the commission you lose while on holiday.
Holiday supplement at (at least) 1%
As an employee, you also receive a holiday supplement of 1% of your salary in the qualifying year. The holiday supplement is a compensation for employees, as taking paid holiday is not quite the same as getting holiday pay. The 1% rate is set by the Holiday Act, but many employees receive a higher holiday supplement than this.
As an employer, you are always allowed to treat your employees better than the law provides.
The holiday supplement is calculated on any income-taxable salary or benefit that is remuneration for work done during employment.
Holiday pay
The holiday pay is 12.5% of your salary qualifying for holiday pay in the qualifying year. If you do not take paid holiday, e.g. when you change jobs, you are entitled to receive your holiday pay from FerieKonto to compensate for this.
The employer is obliged to settle the holiday pay in FerieKonto. Holiday pay is calculated on the basis of the following:
- ATP (supplementary labour market pension) contributions
- Labour market contributions
- Own pension contribution
- Taxable income
- The value of a company car, telephone and other taxable benefits in kind
- Pay during extra holiday entitlement/holidays
The following are not included in the calculation of holiday pay:
- Paid holiday supplement/special holiday pay
- Pay during holidays
When is the holiday supplement paid out?
The employer must pay out the holiday supplement at the latest when the relevant holiday begins. However, many companies choose to pay the holiday supplement twice a year on a fixed basis: in May for the period 1st September to 31st May, and in August for the period 1st June to 31st August, as this reduces the administrative burden within the company.
If the employer opts to pay the holiday bonus before the holiday is taken, it should be noted that the paid amount cannot be offset against any possible holiday pay if the employee later resigns and the holiday has not yet been taken, unless there is provision for this in a collective agreement.
Upon resignation, the employer must pay the holiday bonus for the days taken at the time of resignation (and which have not already been settled).
Do you need advice?
If you, as an employer, need advice regarding the Employment Contract Act or other employee/HR-related matters, you are welcome to contact us.
