Summary
Advance holiday is paid holiday that an employee takes before it has been accrued – only by agreement, never as a requirement. It is offset against the holiday entitlement accrued during the remainder of the holiday year. If an employee leaves the company with a negative holiday balance, the employer may deduct the value from their final pay.
Short answer
Advance holiday – also known as ‘advance holiday’ – is when an employee, by mutual agreement, takes paid holiday before it has been accrued. This requires an agreement between the employer and the employee; you cannot impose it. The holiday taken is offset against the holiday the employee accrues for the remainder of the holiday year. If the employee leaves before the offset has been made, you may deduct the value from their final pay.
What is an advance holiday?
Under the current holiday legislation, employees accrue 2.08 days“ holiday per month and may take their holiday on an ongoing basis (concurrent holiday). However, a new recruit or an employee without any carried-over holiday entitlement may not have accrued enough by the time the autumn half-term or Christmas holidays roll around. In such cases, advance holiday allows them to take paid holiday now and ”work it off’ over the course of the holiday year. The employee’s holiday balance may therefore go into the red for a period of time.
This requires an agreement – and cannot be imposed
Advance holiday is voluntary and is based on an agreement between you and the employee. You cannot give notice or impose An employee may not take holiday in advance – only holiday that has been accrued may be notified. Conversely, the employee is not entitled to advance holiday; this is something you may choose to offer.
How much can be paid in advance?
The advance is limited to the holiday entitlement that the employee can accrue within the same holiday year (1 September–31 August). If, for example, an employee has already accrued and taken 10 days’ holiday during the holiday year, you may only grant an advance on the remaining 15 days. For an employee who starts part-way through the holiday year, you can agree on an advance for the days they will be able to accrue during the remainder of the holiday year – the employee must pay for any other holiday days themselves (unpaid leave).
How to offset the advance holiday
Any holiday that an employee takes in advance is deducted from the paid holiday subsequently accrued during the holiday year. In practice, the negative holiday balance is reduced as new holiday entitlement is accrued, until the balance returns to zero. A payroll system automatically keeps track of this ongoing adjustment.
If the employee leaves before the balance has been settled
If an employee leaves whilst their holiday balance is still in the red, you are entitled under the Holiday Act to set off the value of the holiday taken but not yet accrued, included in the employee’s outstanding entitlement to wages and holiday pay – including holiday allowances accrued but not yet paid. The value is calculated on the basis of the payment the employee actually received during the holiday taken.
Write the rules down
As advance holiday entitlement can lead to a dispute over repayment, it is a good idea to set out clear terms in advance – for example, in the staff handbook or the employment contract. This ensures that both parties are clear about what applies if the employee leaves before they have worked off their holiday entitlement.
We’ll help you with your holiday
It’s easy to make mistakes when it comes to advance holiday pay, settlement and set-off upon leaving the company – and these mistakes affect both the employee’s holiday entitlement and your payroll accounts. At Dansk Løn Service, we keep track of this as an integral part of the payroll process. Read more in our Guide to the new Holiday Act, or Contact us.
The rules have been simplified here. If in doubt, always seek specific guidance on borger.dk or from a payroll officer.