Employees covered by the Holidays Act, have in the transition year from 1 September 2019 to 31 August 2020 accrued holiday funds, which employers must report to the Employees' Holiday Fund by no later than 31 December 2020. However, only holiday funds for employees covered by the Holidays Act must be reported to the Employees’ Holiday Fund, and it is therefore important to understand the definition of an employee for the purposes of reporting to the Employees’ Holiday Fund.

The right to holiday and holiday pay in accordance with the Holiday Act belongs to anyone who performs personal work in an employment relationship for remuneration (“employees”). The Holidays Act does not contain a definition of an employee, but according to practice there are several parameters that must be considered when deciding whether an employee is covered by the Act.

It is the company’s responsibility to assess who is an employee within the meaning of the Holiday Act for reporting holiday funds.

“True directors" are not considered employees in accordance with the Holiday Act. There are many titles that can give the impression that an employee is taking a position as a director, without them being “true directors”. It is therefore never sufficient to simply look at an employee's title when deciding whether an employee is covered by the Holidays Act.

The assessment of whether an individual has employee or “true director” status, for the purposes of the Holidays Act, must be made based on several parameters.

It will often be the case for a “true director”, that they are registered as such with the Danish Business Authority. If the director has the authority to sign on behalf of  the company or the person in question is the company's chief executive,  then in all probability they are likely to be classed as a "true director" and not comprised by the Holiday Act. A director who refers to other directors within the company will in most cases be an employee, while a director who has a direct reference to the board of directors or the company's owners will often be a “true director” and will thus not be an employee for the purposes of the Holiday Act.

The right to annual leave for a "true director" and others who are not covered by the Holiday Act (as this has traditionally been interpreted) will typically be regulated by the contract that governs the relationship. In certain cases it may for example, be agreed that the director is entitled to leave in accordance with the rules of the Holidays Act and in other cases the contract will specifically state that the Holidays Act does not apply, but that the director will be granted the same annual leave entitlement as per the Holiday Act provisions. If it has been agreed in the director's contract that the director is covered by the Holidays Act, the director's right to holiday pay relating to the transitional year must be settled. However, the mere fact of such an agreement does not mean that the holiday funds must or can be reported to the Employees' Holiday Funds. Persons who are not covered by the Holiday Act cannot agree to voluntary payments being made to the Employees' Holiday Funds.

In connection with the early payment of up to three weeks of frozen holiday funds to employees, which was adopted by the Danish Parliament on 17 August 2020, it has been taken into account that "true directors", together with a number of other people, who are also not covered by the Holiday Act by reference to their position, have not earned holiday funds.

Those people who are comprised by the definition of employee for the purposes of the Holiday Act, can from 29 September until 1 December 2020, apply for holiday pay (3 weeks holiday pay) via www.borger.dk/bestilferiemidler.

The three weeks' holiday pay will be calculated based on the holiday pay that the employer has reported for e-income in the period from 1 September 2019 to 31 March 2020. The early payment is funded by the state as employers have currently not reported or paid the amount into the holiday fund.

When applying for up to three weeks of frozen holiday funds via www.borger.dk, the applicant must confirm their employment position. It is possible to choose, among other things, "registered director / managing director or CEO", "independent, owner or co-owner", "board member", "au pair", etc.  The link between these positions being that they will not meet the definition of employees for the purposes of the Holiday Act and therefore will not have earned holiday funds. Therefore, if the position  of “registered director / CEO/Managing Director” is selected, the applicant will  be notified that due to their position in  the period 1 September 2019 to 31 March 2020, he or she has not earned holiday funds. The same applies to the other categories of people who will not be classed as employees and therefore not entitled to holiday funds.

In that situation, an employer must decide whether “true directors” are still entitled to holiday pay from income earned from 1 September 2019 to 31 August 2020, on the basis that the contract is governed by the Holiday Act, and if so, such entitlement must be settled.