The Danish Business Authority opens up for applications for salary and wage compensations
To ease the financial consequences of the Corona virus crisis, the Danish Parliament has on 24 March 2020 adopted the bill on temporary salary and wage compensation in respect of employees in the private labour market. The Danish Business Authority has now opened up for applications for salary and wage compensations.
(Updated 30 March)
The spread of COVID-19 in Danish society as well as in the rest of the world has entailed not only health-related but also financial problems and economic difficulties. On 14 March 2020, the Danish government (Social Democrats) entered into a tripartite agreement with the Danish Trade Union Confederation ("FH") and the Danish Employers' Association ("DA") on temporary salary and wage compensation in respect of employees in the private labour market. On 24 March 2020, the Danish Parliament adopted the bill (L 141). "Bill on the legal status of employers and employees in respect of salary and wage compensations for undertakings in connection with COVID-19", which implements the tripartite agreement between the government, FH and DA.
The employer has to file a digital application for salary and wage compensation on the website of the Danish Business Authority: virk.dk. The website will be open for applications as of 25 March 2020.
Who is covered by the agreement?
The agreement on salary and wage compensation will be applicable to all private undertakings, including associations, foundations, and self-governing institutions. For private undertakings to become entitled to salary and wage compensation, the following conditions must be fulfilled.
- The undertaking must be facing dismissals in Denmark of at least 30 per cent of its staff, or
- The undertaking must be facing dismissals in Denmark of more than 50 employees.
An undertaking cannot make use of the salary and wage compensation if it has laid off employees without pay. In other words, it is a requirement that the employer pays full salary to the employees. Furthermore, an undertaking receiving salary and wage compensation may not dismiss its employees.
What does the salary and wage compensation mean?
Basically, salary and wage compensation means that the State pays a share of the payroll costs of an undertaking for the purpose of avoiding dismissals. The amount of the compensation depends on whether the employees are salaried employees or not.
- Salaried employees: the salary compensation constitutes 75 per cent of the total payroll costs. However, the monthly amount cannot exceed DKK 30,000 per employee.
- Hourly-paid employees: the wage compensation constitutes 90 per cent of the total payroll costs. However, the monthly amount cannot exceed DKK 30,000 per employee.
So far, the temporary compensation scheme is applicable until and including 8 June 2020.
Of what importance is the agreement to employees?
The agreement on salary and wage compensation is not only of importance to the employer. The agreement also entails changes for the employees. This is particularly the case in respect of the following:
- During the compensation period, the employee must take holiday, time off in lieu, or other accumulated time off corresponding to five days. If the employee has not five days of accrued holiday left, the five days may be taken from the new holiday year or be taken as off-duty time without pay.
- The employee can be laid off with one day's notice but will still be entitled to full remuneration.
Flexible short-time working - an alternative to salary and wage compensation
As an alternative to the salary and wage compensation scheme, an arrangement has been introduced allowing a more flexible short-time working. This implies a reduction of the working hours of an employee under a collective agreement. The arrangement can also be applied to employees who are not employed under a collective agreement. The short-time working can follow four different models:
- Working hours are reduced by at least two whole days per week.
- Working hours alternate between one week of full-time work, followed by one week of full redundancy.
- Working hours alternate between two weeks of full-time work, followed by one week of redundancy.
- Working hours alternate between two weeks of full-time work, followed by two weeks of redundancy.
This list is considered as exhaustive, but there is a possibility to alternate between the models along the way. The Danish government has amended the Executive Order on payment of unemployment benefit, which makes it is easier for the employer to establish a short-time working plan. It is thus only required to report such plan to the relevant job centre at the same time as the plan enters into force. The period of such short-time working plan may not exceed 13 weeks.
We are ready to assist you. Please contact us by email or mobile phone - also for an unformal sparring.