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Coronavirus: Calculation when employees are recalled during the salary compensation scheme

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Legal news
calendar 24 April 2020
globus Denmark

Pursuant to the salary compensation scheme companies can recall employees for shorter or longer periods of time during the compensation period. However, when companies benefit from the flexibility of the scheme, it’s important to be aware of whether it still satisfies the criteria of sending home at least 30 % of the workforce, or more than 50 employees, in average calculated on the basis of the entire compensation period.

Companies are eligible to participate in the salary compensation scheme if it would otherwise have faced layoffs for at least 30 % of the workforce or more than 50 employees. The workforce includes everyone with a fixed affiliation to the company except for owners with control of 25 % or more of the company. Furthermore, the scheme only covers employees who were employed before 9 March 2020.  

Calculating the 30 %

Even though the salary compensation scheme presumes that affected employees are sent home for a defined period of time, the scheme provides for the opportunity to call employees back to work during this period. Companies can already choose to define the number of days they expect to recall each employee in connection with submitting the application for the scheme and/or simply recall employees during the compensation period.  

When companies decide to recall employees back to work, it may result in the risk that it falls below the required threshold of having at least 30 % of its workforce sent home in average during the compensation period. To make sure that this requirement, among others, is met, companies should therefore first calculate how it will affect the 30 % threshold if employees are called back to work. 

Although the calculation seems straightforward, several questions and uncertainties have already been raised as to how the 30 % should be calculated, for example, whether companies should include or exclude weekends, as days employees are sent home or oppositely, if these days should be excluded from the calculation altogether?

Pursuant to the wording of the salary compensation scheme, the calculation of the 30 % is based on the entire compensation period. The compensation period is defined as the first day, the company applies for compensation, and last day, the company receives compensation. The period should therefore be calculated according to the total number of calendar days.

Next, companies should deduct the number of working days where employees are recalled. According to the salary compensation scheme and applicable guidelines, working days should be calculated as the number of days employees are recalled. Therefore, weekends and holidays are not included in this calculation.

With these numbers, the percentage can be calculated for each employee and as an average for all employees. Companies can thereby calculate whether the 30 % requirement has been met throughout the whole period, including the expected number of working days.

Reapply for the extended compensation period

Along with the social partners, the Danish government agreed on extending the salary compensation scheme with an extra month. This means that companies can apply for salary compensation in the extended period up to and including 8 July 2020. Another round of application will be opened for all companies in mid-May, where applications for extension can be submitted. Until the new round of application opens, companies can still apply as usual. You can read more about the salary compensation scheme and the extension here.

It is still unclear if the conditions of the scheme will be adjusted with the new extension. For example, it is not clear whether the 5 days the employee must take off, which must be allocated equally during the compensation period, has to be allocated over 4 months, instead of the existing 3 months and what significance it will have, and how much holiday would already be considered as held when reapplying.

IUNO’s opinion

The flexibility of the salary compensation scheme provides for several options, with at the same time triggers certain risks that companies should be aware of and thoroughly review. It’s complicated to remember all the rules, and even minor mistakes can be expensive if resulting in claims for repayment, if it turns out that the company did not meet the terms and conditions of the salary compensation scheme as otherwise expected. Companies should therefore thoroughly calculate the thresholds before the application process is carried out.

IUNO is ready to advise companies about the salary compensation scheme, including a calculating of whether you meet the criteria of the scheme as well as the application process itself.

Companies are eligible to participate in the salary compensation scheme if it would otherwise have faced layoffs for at least 30 % of the workforce or more than 50 employees. The workforce includes everyone with a fixed affiliation to the company except for owners with control of 25 % or more of the company. Furthermore, the scheme only covers employees who were employed before 9 March 2020.  

Calculating the 30 %

Even though the salary compensation scheme presumes that affected employees are sent home for a defined period of time, the scheme provides for the opportunity to call employees back to work during this period. Companies can already choose to define the number of days they expect to recall each employee in connection with submitting the application for the scheme and/or simply recall employees during the compensation period.  

When companies decide to recall employees back to work, it may result in the risk that it falls below the required threshold of having at least 30 % of its workforce sent home in average during the compensation period. To make sure that this requirement, among others, is met, companies should therefore first calculate how it will affect the 30 % threshold if employees are called back to work. 

Although the calculation seems straightforward, several questions and uncertainties have already been raised as to how the 30 % should be calculated, for example, whether companies should include or exclude weekends, as days employees are sent home or oppositely, if these days should be excluded from the calculation altogether?

Pursuant to the wording of the salary compensation scheme, the calculation of the 30 % is based on the entire compensation period. The compensation period is defined as the first day, the company applies for compensation, and last day, the company receives compensation. The period should therefore be calculated according to the total number of calendar days.

Next, companies should deduct the number of working days where employees are recalled. According to the salary compensation scheme and applicable guidelines, working days should be calculated as the number of days employees are recalled. Therefore, weekends and holidays are not included in this calculation.

With these numbers, the percentage can be calculated for each employee and as an average for all employees. Companies can thereby calculate whether the 30 % requirement has been met throughout the whole period, including the expected number of working days.

Reapply for the extended compensation period

Along with the social partners, the Danish government agreed on extending the salary compensation scheme with an extra month. This means that companies can apply for salary compensation in the extended period up to and including 8 July 2020. Another round of application will be opened for all companies in mid-May, where applications for extension can be submitted. Until the new round of application opens, companies can still apply as usual. You can read more about the salary compensation scheme and the extension here.

It is still unclear if the conditions of the scheme will be adjusted with the new extension. For example, it is not clear whether the 5 days the employee must take off, which must be allocated equally during the compensation period, has to be allocated over 4 months, instead of the existing 3 months and what significance it will have, and how much holiday would already be considered as held when reapplying.

IUNO’s opinion

The flexibility of the salary compensation scheme provides for several options, with at the same time triggers certain risks that companies should be aware of and thoroughly review. It’s complicated to remember all the rules, and even minor mistakes can be expensive if resulting in claims for repayment, if it turns out that the company did not meet the terms and conditions of the salary compensation scheme as otherwise expected. Companies should therefore thoroughly calculate the thresholds before the application process is carried out.

IUNO is ready to advise companies about the salary compensation scheme, including a calculating of whether you meet the criteria of the scheme as well as the application process itself.

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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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