A holiday supplement is a financial compensation paid to employees who receive paid holiday leave. The supplement amounts to at least 1% of the employee’s earnings during the holiday accrual year and is intended to offset the difference between paid holiday leave and holiday pay compensation. It is paid either when holiday leave is taken or, in many cases, twice a year - typically in May and August.
But what are the rules governing paid holiday leave, holiday supplements, and taking annual leave? In this article, we explain everything employees and employers need to know about holiday supplements so that they can manage them correctly and confidently.
A holiday supplement is a financial payment made to employees who take paid holiday leave. It amounts to at least 1% of the employee’s earnings during the holiday accrual year and is intended to compensate for the difference between paid holiday leave and holiday pay compensation.
The supplement is paid either when holiday leave is taken or on fixed dates twice a year - typically in May and August.
To qualify for paid holiday leave, you must be employed on a monthly salary and be entitled to full pay on public holidays and during periods of sickness. If these conditions are not met, you will instead be entitled to holiday pay compensation.
For each month you are employed during the holiday year (1 September to 31 August), you accrue 2.08 days of paid holiday leave. This means you can accrue up to 25 days of holiday per year. Under Denmark’s concurrent holiday scheme, you are entitled to take holiday as soon as it has been accrued.
Once you have accrued the right to paid holiday leave, your holiday pay corresponds to your normal fixed salary at the time the holiday is taken. If you receive employment benefits that cannot be used during your holiday, their value must be included in your holiday pay.
If you are paid on commission, you must also be compensated for any commission income you lose while on holiday.
In addition to receiving your normal salary during holiday leave, you are entitled to a holiday supplement of at least 1% of your earnings during the accrual year. This rate is set out in the Danish Holiday Act, but many employees receive a higher supplement, as employers are always free to provide more favourable terms than the statutory minimum.
The holiday supplement is calculated on all taxable salary payments and employment benefits that constitute remuneration for work performed.
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If you do not meet the requirements for paid holiday leave, you are instead entitled to holiday pay compensation equal to 12.5% of your holiday-entitled earnings during the accrual year.
When employment ends, the employer must settle the holiday pay compensation. The amount is transferred to FerieKonto (the Danish Holiday Account scheme), a holiday fund, or - where specifically agreed - retained within the company.
Holiday pay compensation is calculated on the basis of, among other things:
However, the following are not included in the calculation of holiday pay compensation:
The employer must pay the holiday supplement no later than when the corresponding holiday leave begins. However, many organisations choose, for administrative reasons, to make payments twice a year:
If the employer pays the holiday supplement before the holiday is taken, the amount cannot be deducted from any holiday pay compensation payable on termination of employment unless a collective agreement expressly permits this.
Upon termination of employment, the employer must pay the holiday supplement relating to any holiday already taken and not previously settled.
If you’re an employer seeking guidance on holiday matters or any HR-related issues, feel free to get in touch.
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