Annual leave - how does that work?
The holiday season is coming up, and each year the same questions pop up:
- How is unspent annual leave transferred?
- How much annual leave can be transferred, and what are the formal rules?
- What if an employee becomes ill before his or her holiday or during it?
- What about additional holidays?
We will give you a quick overview of the rules. Read more below.
'Accrual'-year and the 'holiday'-year
The right to paid leave accrues during the calendar year from 1 January to 31 December (which we will refer to as the 'accrual year")
Paid leave is taken during the holiday year which runs from 1 May to 30 April in the year after the accrual year.
The figure below shows how the two years are linked.
Every employee earns the right to paid leave which amounts to 2.08 days per month of employment during the accrual year. If a person is employed for a full year, he or she has earned 25 days of paid leave.
The rules are set out in the Danish Holiday Act, and are based on the premise of a five-day working week. It does not matter whether the employee is working full time or part-time for the company. Part-time workers also have the right to 25 days of paid leave if they have worked throughout the entire accrual year.
How do you transfer unspent annual leave?
If the employee has not had time to spend their entire holiday entitlement before the end of the holiday year, expiring on 30 April, any annual leave beyond 20 days can be transferred into the next holiday year. Taking more than 20 days of paid leave is often referred to as the "fifth holiday week". Please note however that special rules may apply if the employment is covered by a collective agreement.
The agreement on the transfer of unspent holiday entitlement takes place between the employee and employer and should for legal reasons always be put in writing. The agreement must be concluded before 30 September after the end of the holiday year.
If an agreement has been made on the transfer of unspent days, the employer must notify the Danish Labour Market Holiday Fund or the relevant holiday card scheme administrator. Failure to do so will result in the Holiday Fund/administrator classifying the annual leave transfer as unclaimed. In some cases, the failure to notify the appropriate authority can mean that the company itself is liable for compensating the employee for the 'lost' holiday entitlement.
Illness before and during annual leave
The employee's paid leave begins on the first day of leave when working hours begin.
Illness before annual leave
If the employee becomes ill before the first day of leave commences, such an event is referred to as an annual leave obstacle, and the employee consequently has no obligation to take his/her holiday entitlement. If the employee does not wish to take his/her leave due to illness, the employee has to formally notify their employer that their illness has become an obstacle to taking their annual leave.
From the 2012/2013 holiday year and onwards, employees have been entitled to so-called 'compensatory leave' if they have not been able to take their leave due to illness.
If the employee recovers before their originally planned annual leave ends, they must report themselves as healthy and notify their employer if they wish to go back to work or take the remainder of their originally planned leave.
Illness during holiday
If an employee becomes ill after the leave has begun, the employee is entitled to compensatory leave after the first five sick days.
If the employee has more than one period of leave with illness within a holiday year, the employee is entitled to compensatory leave after five sick days counted over the total holiday year. Accordingly, if the employee has had five sick days during their first holiday in a holiday year, the employee would generally be entitled to compensation from the first reported sick day if he or she falls ill during another one of their holidays in the same holiday year.
It is, however, contingent on the employee having accrued the full 25 days of paid leave. If the employee has accrued fewer than 25 days of leave, he or she accordingly is entitled to fewer days of compensatory leave. This means that the right to compensatory leave commences relatively sooner. The number of days that the employee does not get compensatory leave for is calculated by multiplying the number of accrued days of leave by 1/5.
Say, for instance, that an employee has earned the right to 20 days of leave. The number of sick days that the employee does not get compensatory leave for is 20 x 1/5 = 4 days.
The rules on compensatory leave are contingent on the employee obtaining a doctor's note confirming that he or she has been ill.
Many people believe that additional holidays are extra leave covered by the Holiday Act, but that is not the case. The right to additional holidays can either be the result of a collective agreement, specified in an employee handbook or individually agreed with the employee.
As the Holiday Act does not regulate the additional holiday and because the Holiday Fund cannot process contributions for more than 25 days of annual leave, it is important that the employer establishes clear guidelines on how the additional holidays are handled.
Azets therefore recommends that you, as the employer, should consider the following points:
- How are the additional holidays accrued (from the employee's first day of work, by the calendar year, or the holiday year)?
- How should the additional holiday be spent (should they be spent before/after the holidays covered by the Holiday Act)?
- How to handle unspent additional holidays (transfer to next year, lapse or salary compensation)?
- How will you administer and monitor additional holidays?
How will you administer and monitor special leave?