How should you deposit frozen holiday funds in Denmark?

Blog | Payroll and HR | Løn og HR | 30/11/2020

by Lisbeth Lindorff Riis

 

With the new Danish holiday act came the requirement that the holiday funds that your employees have earned in the period 1 September 2019 to 31 August 2020 remain frozen until the employees leave the labor market. You can choose to manage the money in the company yourself until payment (up to 50 years), or you can choose to pay in the frozen holiday funds to the fund, Lønmodtagernes Feriemidler.

In this blog post, I will give you practical information on how to deposit the frozen holiday funds that your employees have earned in the period September 1, 2019 to August 31, 2020.

Read also: Danish Holiday Act -  four tasks for you as an employer

You have a duty to report

REMEMBER DEADLINE FOR REPORTING DECEMBER 31

As you are probably familiar with, all employers in connection with the new Danish holiday act must make sure to report each employee's frozen holiday funds to the newly established fund, Lønmodtagernes Feriemidler. In connection with each individual employee's report, it must be stated whether the holiday funds are paid in now or whether the money is kept in the company. The latter will be considered a loan in the fund.

But you have a duty to report no matter when you choose to pay in the frozen holiday funds. This means that for the freezing period, September 1st 2019 to August 31st  2020, you must report the frozen holiday funds no later than December 31st 2020 via e-Inkomst.

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

Gathered reporting and payment

If you choose to report together, it will also be possible to pay in total. As mentioned, the deadline for reporting is 31 December 2020, and this deadline originally also applied to total payment.

With the urgent bill with the payment of three weeks of frozen holiday funds, the possibility of total payment has been moved to July 2021 with a deadline of September 1st 2021.

Upon payment, the frozen holiday funds will be placed in a custodian account, and when both 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.

The deadline for gathered payments is set for September 1st every year.

Deferred payment

As you are probably familiar with, you as an employer can choose whether you pay in for some groups of your employees and thus wait to pay in for other groups. However, a full balance must always be paid per employee. So you can not just pay in half of an employee's saved holiday funds once you choose to pay in.

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

Payment of the frozen holiday funds must take place at the latest when given employees leave the labor market and thus have the right to have them paid out. You can therefore choose to keep the frozen holiday funds in the company until payment. And it is an option you should consider because it can boost your company's liquidity.

By keeping the frozen holiday funds in the company, you can use them for development, growth and investment. But that choice also requires a large number of administrative tasks, because you must, among other things, index the holiday funds according to the fund's instructions and indexations until the affected employees leave the labor market. This means that you may have to manage the frozen holiday funds for up to 50 years, but in all that time you can use them to create growth in your business.

We can help you manage the frozen holiday funds - read more in our Danish website here.

About Lisbeth Lindorff Riis

Lisbeth Lindorff Riis holds a Master of Business Laws (Cand.merc.jur) from Aarhus School of Business and a Master of Laws (Cand.jur) from the University of Copenhagen. Lisbeth has 16 years of experience in legal advice within HR, including personal data law issues - GDPR, employment law and maternity leave. In Azets, Lisbeth is Head of HR Legal.