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You can now deposit frozen holiday funds

 

The new Holiday Act brought in the requirement for holiday funds earned by your employees in the period from 1 September 2019 to 31 August 2020 remain frozen until the employees leave the labour market. You can choose to manage the funds within the company until the time of payment (up to 50 years), or you can choose to deposit the frozen holiday funds into the fund the Employees’ Fund for Residual Holiday Funds (Lønmodtagernes Feriemidler).

In this article, we will share some practical information on how to deposit the frozen holiday funds earned by your employees in the period from 1 September 2019 to 31 August 2020.

You have a duty to report

As you are probably aware, in connection with the new Holiday Act, all employers are required to report each employee’s frozen holiday funds to the newly established fund, the Employees’ Fund for Residual Holiday Funds. The reports for each individual employee must state whether the holiday funds are being deposited now or whether the money is being kept in the company. The latter will be considered a loan taken out from the fund.

However, your duty to report applies no matter when you choose to deposit the frozen holiday funds. This means that, for the period during which funds are frozen (1 September 2019 to 31 August 2020), you must report the frozen holiday funds via eIndkomst. The deadline for reporting was 31 December 2020.

As an employer, you have the option of reporting the frozen holiday funds on an ongoing basis in connection with ordinary payroll settlement, or you can choose to report the holiday funds as one total.

Reporting and depositing

If you choose to report the holiday funds as one total, it is also possible to make one total deposit for all employees. As mentioned, the deadline for reporting was 31 December 2020.

On 1 February 2021 it was announced that, from that date, companies would be able to make voluntary deposits of employees’ frozen holiday funds. It is possible to make one total deposit for all employees but, as a company, you can also choose to deposit on an ongoing basis (see more below).

Upon deposit, the frozen holiday funds will be placed in a custody account. When both the employee and employer have been notified of the balance of the frozen holiday funds, and the consultation deadline has passed, the holiday funds will be transferred to the fund.

On 1 July 2021 and every year onwards, as a company, you will receive a collection from the Employees’ Fund for Residual Holiday Funds which covers holiday funds for the employees who are entitled to have their funds paid out (if they have retired, for example). The deadline for payment has been set to 1 September every year.

Deferred deposits

As you know, as an employer you can choose whether to deposit for some of your employee groups and hold off on doing so for other groups. However, a full balance must always be deposited per employee. So when you choose to deposit funds, you cannot deposit just half of an employee’s saved holiday funds.

If you want to keep the frozen holiday funds within the company

Payment of the frozen holiday funds must take place no later than when the employees in question leave the labour market and thus earn the right to have the funds paid out. As mentioned, the deadline for this is 1 September every year. Thus, you can choose to keep the frozen holiday funds in the company until payment. And this is an option you should consider in order to avoid a challenge to the liquidity of your business.

By keeping the frozen holiday funds in the company, you can use them for development, growth and investment. But that choice also involves a large number of administrative tasks, because you have to (i.a.) index the holiday funds according to the instructions and indexations until the employees in question leave the labour market. While this means that you may have to manage the frozen holiday funds for up to 50 years, during all this time, you are free to use them to create growth in your business.

Let Azets assist with the administration of the frozen holiday funds

If you choose to keep the funds in the company, you have the opportunity to place the administrative tasks with Azets.

We will handle the administrative tasks until the frozen holiday funds must be paid to the employees, or you decide to pay the holiday funds to the fund.

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