The holiday supplement is a compensation for your employees and are equal to 1% of their salary for the annual holiday qualifying year. The holiday supplement is paid at the latest when the holiday is taken, but can also be paid as a lump sum twice a year: in May for 1/9-31/5 and in August for 1/6-31/8. Often the two lump-sum payments are chosen 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.
Holidays, paid holiday and compensation
As an employee, you accrue the right to 2.08 days of paid holiday for each month of employment during the holiday year (1/9-31/8). Whether you have accrued the right to payment or not, you are always entitled to 25 days of annual holiday as an employee. 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 of (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.
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. If the holiday supplement is paid out before the holiday begins, it cannot be demanded returned.
Many companies choose to pay out holiday supplements twice a year: in May and August. However, the employer can also delay paying the holiday supplement until the holiday is taken. However, many avoid this option as it often involves a lot of administrative work.
However, if an employer chooses to pay out the holiday supplement before the holiday is taken, you should be aware that the amount paid may not be offset against any earned holiday pay if the employee later resigns and the holiday has not yet been taken, unless there is a legal basis for this in a collective agreement.
Under the new Holiday Act, if an employee resigns from their post, the employer must pay a holiday supplement for the days that have been 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.