Under the agreement, all employees will be entitled to the same number of holiday days as they are today. However, in future, employees will have to accrue and take their annual leave at the same time – unlike at present, where annual leave is accrued during the calendar year from January to December but cannot be taken until 1 May of the following year. Among other things, this will mean that new entrants to the labour market will be able to take paid holiday during their first year of employment.
The parties to the agreement agree that a transitional arrangement should be put in place between the old and new annual leave legislation. The aim is, amongst other things, to reduce the loss of liquidity that employers will experience when switching to the new annual leave legislation. At the same time, the transitional arrangement will ensure that everyone transitions to annual leave under the new Act at the same time, so that administration does not have to be carried out according to different rules for different groups of employees.
Under the transitional arrangement, the holiday allowance accrued in accordance with the Holiday Pay Act for a full year will be placed in a fund to be managed by LD. It is estimated that the fund will amount to DKK 80–85 billion.
Employees will be paid their outstanding holiday allowance when they retire or leave the labour market permanently.
A positive challenge
LD will have overall responsibility for the fund containing the employees' holiday allowance, whilst ATP will assist with the day-to-day administration, including collecting contributions from employers and making payouts to employees.
LD will be responsible for asset management, which will be based on two pillars – partly loans from employers and partly holiday allowance funds that have been transferred to LD’s investment portfolio. Employers may transfer the funds at any time and thereby settle their loan to the fund. It is therefore unclear how much capital LD will have available for investment. When the fund is established in 2020, approximately DKK 10 billion is expected to be transferred from holiday accounts and holiday funds, in addition to voluntary payments from employers.
LD must draw up an investment strategy that takes account of the uncertainty surrounding the size of the investment portfolio.
"Of course, the uncertainty surrounding the size of the investment portfolio presents a challenge, but it’s a positive one. We’re happy to work with that," says LD’s director, Dorrit Vanglo.
LD’s management structure in the investment sector is flexible, and the assets in the holiday fund can be easily integrated into LD’s existing fund structure. The investment partnership with the LD scheme ensures low costs and access to qualified investment advisers from day one in all key areas.
