Special Holiday Allowance: What is it?

Special holiday allowance is an additional holiday payment that many employers need to deal with – particularly in the public sector and in organisations with employees covered by collective agreements. Although the concept is often mentioned in connection with holiday and pay, the rules can be unclear for many employers. When should it be paid? How is it calculated? And how does it differ from the standard holiday allowance?

In this blog post, we explain what special holiday allowance is, how it is calculated, and which rules and deadlines employers need to be aware of. The aim is to provide a clear overview so that you can handle the payment correctly and avoid errors in payroll administration.

What is the Danish special holiday allowance?

A special holiday allowance is an additional holiday supplement paid to employees in the state, regional, or municipal sector in Denmark. The rate varies between 1.15% and 1.95%, depending on the employee’s workplace. The amount is calculated based on the holiday-entitled salary earned in the accrual year – that is, the previous calendar year.

If you are an employer in a public organisation or your employees are covered by a collective agreement, you must be aware of this allowance, as it is your responsibility to ensure correct calculation and payment.

How is the special holiday allowance calculated?

All employees earn the right to paid holiday, either as holiday pay savings (12.5% of salary) or holiday with pay (including a holiday supplement).

If your employees receive holiday with pay, you must calculate and pay a holiday supplement.

The Danish Holiday Act sets a minimum supplement of 1%, but for employees in the state, regional, and municipal sectors or under a collective agreement, this rate is higher.

The extra percentage is called the special holiday allowance and is a beneficial arrangement for the employees in question.

The special holiday allowance is calculated based on the holiday-entitled salary from the accrual year (the previous calendar year). Some collective agreements spread the payment over three instalments, ensuring that the special holiday allowance aligns with the two annual holiday supplement payments.

Difference between holiday pay and special Holiday Allowance

Many people confuse holiday pay and special holiday allowance, but there are significant differences:

• Holiday pay (12.5%): Paid to hourly and temporary employees instead of paid holiday. The amount is deposited into FerieKonto and paid out one month before the holiday.
• Special holiday allowance (1.15 – 1.95%): Paid as an additional supplement to employees in the state, regional, and municipal sectors and collective agreement-covered employees who receive holiday with pay.

Holiday pay when changing jobs

If an employee changes jobs, the earned holiday pay must be settled by the employer. The holiday pay (12.5%) must be transferred to FerieKonto no later than the 7th of the second month after resignation.

The holiday-entitled salary includes:

• Taxable income (including the value of free phone, company car, and other taxable benefits).
• Employee pension contributions.
• AM and ATP contributions.
• Salary during special holiday days and/or extra leave days.

If an employee is entitled to a special holiday allowance, it only needs to be settled upon job change if this is specified in the contract or collective agreement. This applies whether the employee is leaving or joining your company.

Payment deadlines

The annual holiday supplement and special holiday allowance must be paid either:

• At the time of holiday leave, or
• Twice a year – in May and August (according to the Danish Holiday Act).

Need help?

Would you like to learn more about managing employee holidays or have other legal HR-related questions? Azets can assist you with all questions regarding HR legal matters.