The Government has reached an agreement with a majority of the political parties on a summer package. A key part of the summer package is that three out of the five weeks’ worth of frozen holiday allowance are to be paid out to employees. Just a few days ago, however, the announcement had been that two out of five weeks’ holiday allowance funds would be paid out as payouts. Payouts for frozen holiday allowance have long been on the table as one of the policy measures designed to kick-start growth following the Covid-19 lockdown.
The three weeks’ holiday allowance funds due for payouts will be paid by October at the latest. This is because employees are currently in the process of accruing holiday allowance funds, which are accrued right up until 31 August 2020. The payouts will reflect a specific accrual period from 1 September 2019 to 31 March 2020.
Increased pressure on enquiries
We are currently experiencing an exceptionally high volume of enquiries – both at Customer Services and via the self-service portal. However, you cannot yet see the amount you are due to receive. This is because only the holiday allowance funds that have been provisionally reported are visible in the self-service portal, and only if your employer has chosen to report them on an ongoing basis.
As mentioned, the payouts will reflect a fixed accrual period from 1 September 2019 to 31 March 2020. It therefore matters to you, as an employee, whether your salary was higher or lower during that specific period.
The government is responsible for the payouts
Originally, the plan was that all five weeks’ holiday allowance funds that employees save up during the transition year to the new holiday pay legislation would be placed in a savings scheme with the Holiday Allowance Fund, from which it could only be paid out as a lump sum upon leaving the labour market. With brought-forward partial payouts, it is expected that the state will cover the early payouts so as not to drain companies’ liquidity.
Under the current rules, employers may retain employees’ accrued holiday allowance funds within the company, subject to annual indexation, until such time as the holiday allowance funds must, by law, be paid into the Employees’ Holiday Allowance Fund. It is therefore expected that the state will initially finance the three weeks' worth of frozen holiday allowance for employees.
The Holiday Allowance Fund manages the frozen holiday allowance funds and is a new fund that operates as a separate financial entity under LD Pensions.
