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Act on salary compensation scheme under the coronavirus passed

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calendar 24 March 2020
globus Denmark

As a result of tripartite negotiations between the social partners, the Danish government has just passed the new bill on the temporary salary compensation scheme. Together with several other measures, the Danish government is, thereby, still trying to mitigate the substantial negative consequences of the coronavirus outbreak for companies and employees.

As a direct consequence of the outbreak of the coronavirus (COVID-19), a serious financial impact has and is still causing substantial declines in productivity and turnover levels and is, as a result, triggering huge numbers of redundancies. The Danish government has, therefore, just passed the bill on the new tripartite agreement with the Danish social partners allowing for the implementation of the temporary salary compensation scheme for employees otherwise facing termination. Combined with several other measures, the salary compensation scheme is an important step from the Danish government in its attempt to mitigate the serious effects resulting from this extraordinary situation on the labour market.

With the new bill, the Danish government has established a temporary salary compensation scheme for companies that has employees who would otherwise face mass redundancy. Companies, who are extraordinarily financially affected by the outbreak and who would otherwise need to proceed to termination of at least 30 % of its workforce or minimum 50 employees, are eligible. Calculation of the total number of employees to be used is based on information from the Danish Central Business Register (CVR) and includes employees who were employed by the company before 9 March 2020. Contrary to other schemes, this scheme does not presume the existence of any collective bargaining agreement or collective agreement.

Companies wishing to benefit from the new scheme must send employees home with their full salary during the salary compensation period. Employees may be sent home with one day’s notice. At the same time, it is also a condition that employees do not perform any work during the salary compensation period.

Pursuant to the salary compensation scheme, companies will receive:

  • Up to 75 % (but maximum DKK 30,000) for employees subject to the Salaried Employees Act
  • Up to 90 % (but maximum DKK 30,000) for employees not subject to the Salaried Employees Act

As part of the new bill, employees covered by the scheme must take up to five days of accrued holiday, or subject to individual agreement holiday which has not yet been accrued, and/or time of in lieu of accrued overtime. Alternatively, employees may also elect to take unpaid time off. During this period, the company will not receive salary compensation payments. It’s important to note that the period of five days is based on the maximum three-month period under the scheme wherefore the number of days to be taken will decrease proportionally depending on the period which the company applies for. At the same time, the requirement to take five days off will not apply if the company has already concluded an agreement on salary reduction with the employee representative or the affected employees before submitting an application under the salary compensation scheme. Days off must, in any case, be planned pursuant to negotiations with the employee and in case of disagreement, the company may allocate the days proportionally over the salary compensation period.

Companies must refrain from terminating employees during the period covered by the salary compensation scheme. Consequently, the salary compensation period commences on the day the first affected employee is sent home and ends earlier if the company gives notice or terminates an employee due to its economic circumstances.

In addition, it’s a condition that the company refrains from using other schemes allowing it to send employees home without pay as discharge or agreements on division of labour.  

The scheme will apply from 9 March to 9 June 2020 and companies may submit their application within that period via virk.dk. Companies can as a main rule only apply for salary compensation once, but if it later shows that an additional need for sending employees home occur, it will be allowed to resubmit an application.

When submitting the application online, companies must provide information on:

  • The number of employees who will be sent home
  • CPR-numbers, salary and occupational level of affected employees
  • Period for which the company is applying for salary compensation
  • Solemn declaration from management that the provided information is correct

Companies applying under the scheme must be assisted by an accountant. After receiving salary compensation, companies must document that the provided information was correct. The requirement to document also includes confirmation from the employee representative if applicable that the affected employees were sent home in that period. 

Aside from the tripartite agreement, the Danish government has introduced several other measures, including:

  • Sick pay reimbursement from day one in case of sick leave due to the coronavirus or quarantine
  • The release of additional capital to the banks
  • Two new guarantee schemes
  • More flexibility when entering into work-share agreements
  • Possibility for 30-day skill development program within the hospitality- and restaurant industry

Companies must be aware that even though employees must not work during the period, the agreement does allow for companies to recall employees fully or partly, for example in case of unexpected orders. Companies applying this option must thereafter repay salary compensation for that period where the employee returned to work. Alternatively, companies may already at the time of submitting the application declare the number of days it expects to recall the employee during the compensation period. Thereafter, the compensation amount will be determined based on the defined compensation period, excluding the number of days the employee returned to work.

We are monitoring the development closely and will follow up when there is news to report.

As a direct consequence of the outbreak of the coronavirus (COVID-19), a serious financial impact has and is still causing substantial declines in productivity and turnover levels and is, as a result, triggering huge numbers of redundancies. The Danish government has, therefore, just passed the bill on the new tripartite agreement with the Danish social partners allowing for the implementation of the temporary salary compensation scheme for employees otherwise facing termination. Combined with several other measures, the salary compensation scheme is an important step from the Danish government in its attempt to mitigate the serious effects resulting from this extraordinary situation on the labour market.

With the new bill, the Danish government has established a temporary salary compensation scheme for companies that has employees who would otherwise face mass redundancy. Companies, who are extraordinarily financially affected by the outbreak and who would otherwise need to proceed to termination of at least 30 % of its workforce or minimum 50 employees, are eligible. Calculation of the total number of employees to be used is based on information from the Danish Central Business Register (CVR) and includes employees who were employed by the company before 9 March 2020. Contrary to other schemes, this scheme does not presume the existence of any collective bargaining agreement or collective agreement.

Companies wishing to benefit from the new scheme must send employees home with their full salary during the salary compensation period. Employees may be sent home with one day’s notice. At the same time, it is also a condition that employees do not perform any work during the salary compensation period.

Pursuant to the salary compensation scheme, companies will receive:

  • Up to 75 % (but maximum DKK 30,000) for employees subject to the Salaried Employees Act
  • Up to 90 % (but maximum DKK 30,000) for employees not subject to the Salaried Employees Act

As part of the new bill, employees covered by the scheme must take up to five days of accrued holiday, or subject to individual agreement holiday which has not yet been accrued, and/or time of in lieu of accrued overtime. Alternatively, employees may also elect to take unpaid time off. During this period, the company will not receive salary compensation payments. It’s important to note that the period of five days is based on the maximum three-month period under the scheme wherefore the number of days to be taken will decrease proportionally depending on the period which the company applies for. At the same time, the requirement to take five days off will not apply if the company has already concluded an agreement on salary reduction with the employee representative or the affected employees before submitting an application under the salary compensation scheme. Days off must, in any case, be planned pursuant to negotiations with the employee and in case of disagreement, the company may allocate the days proportionally over the salary compensation period.

Companies must refrain from terminating employees during the period covered by the salary compensation scheme. Consequently, the salary compensation period commences on the day the first affected employee is sent home and ends earlier if the company gives notice or terminates an employee due to its economic circumstances.

In addition, it’s a condition that the company refrains from using other schemes allowing it to send employees home without pay as discharge or agreements on division of labour.  

The scheme will apply from 9 March to 9 June 2020 and companies may submit their application within that period via virk.dk. Companies can as a main rule only apply for salary compensation once, but if it later shows that an additional need for sending employees home occur, it will be allowed to resubmit an application.

When submitting the application online, companies must provide information on:

  • The number of employees who will be sent home
  • CPR-numbers, salary and occupational level of affected employees
  • Period for which the company is applying for salary compensation
  • Solemn declaration from management that the provided information is correct

Companies applying under the scheme must be assisted by an accountant. After receiving salary compensation, companies must document that the provided information was correct. The requirement to document also includes confirmation from the employee representative if applicable that the affected employees were sent home in that period. 

Aside from the tripartite agreement, the Danish government has introduced several other measures, including:

  • Sick pay reimbursement from day one in case of sick leave due to the coronavirus or quarantine
  • The release of additional capital to the banks
  • Two new guarantee schemes
  • More flexibility when entering into work-share agreements
  • Possibility for 30-day skill development program within the hospitality- and restaurant industry

Companies must be aware that even though employees must not work during the period, the agreement does allow for companies to recall employees fully or partly, for example in case of unexpected orders. Companies applying this option must thereafter repay salary compensation for that period where the employee returned to work. Alternatively, companies may already at the time of submitting the application declare the number of days it expects to recall the employee during the compensation period. Thereafter, the compensation amount will be determined based on the defined compensation period, excluding the number of days the employee returned to work.

We are monitoring the development closely and will follow up when there is news to report.

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Anders

Etgen Reitz

Partner

Søren

Hessellund Klausen

Partner

Kirsten

Astrup

Associate

Nina

Kumari

Associate

Cecillie

Cathrine Groth Henriksen

Associate

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