News

COVID-19: Temporary Salary Compensation Scheme

Published
20 Mar 2020
On 24 March 2020, the Government passed a temporary law that implements the three-party agreement on temporary salary compensation for private companies that, due to the impact of COVID-19, are facing dismissals of at least 30% of the staff or more than 50 employees. In this article, you will get an overview of the law and how you can apply for compensation.

The agreement allows private companies to receive salary compensation retroactively from 9 March to 8 July 2020.

On Monday 30 March 2020, the Government and the labor market parties further agreed to retroactively raise the ceiling for salary compensation for salaried employees from DKK 23,000 to DKK 30,000 and for employees not subject to a CBA from DKK 26,000 to DKK 30,000. No further changes to the temporary scheme have been agreed.

The content of the scheme:

  • The salary compensation scheme applies to all private companies that are registered in the CVR register and who are facing having to notify redundancies in Denmark of at least 30% of the staff or more than 50 employees.
  • The state will pay compensation to the company for the employees who are send home instead of being dismissed due to COVID-19. The scheme only applies to employees who are working in Denmark.
  • Employees are send home with full salary and must not work during the period.
  • Salary compensation is subject to the company opting out of any existing alternatives that include sending home employees without salary.
  • The company receives salary compensation of up to 75% for employees who are subject to the Salaried Employee Act but a maximum of DKK 30,000 per month.
  • For employees who are not subject to the Salaried Employee Act, the salary compensation can be up to 90%, but a maximum of DKK 30,000.
  • Employers can send home employees with one day's notice, and the salary compensation period commences when the first employee is send home and ends when the company notifies or dismisses any employee due to financial reasons, or at the end of the planned three-month’s period.
  • Establishment of a salary compensation scheme can take place regardless of provisions in the collective bargaining agreement, other legislation or other agreements between employee and employer.
  • It is possible to call back employees, who have been sent home, to work, and then send them home again. The company must by all accounts follow the instructions and keep above 30 % or 50 employees in the period.  

EMPLOYEES PAY FOR 5 DAYS IN THE COMPENSATION PERIOD

Employees who are comprised by the salary compensation scheme do not receive salary for a period equivalent to five working days during the entire period. The employee must in principle pay for the five days, even in the case of paid holiday. In that case, the company's obligation to holiday pay to the employee are written down.

The employee may choose whether the five days are holiday and/or time off or other arrangements agreed at the workplace, e.g. flex time or special holiday. If the employee is not entitled to holiday or time off, the employee can choose to be off duty without salary or use 5 holidays from the next holiday year.

The employer decides when these days are placed, however they must be placed proportionately within the period, e.g. 2 days in the first month, 2 days in the second month and 1 day in the third month. The employer must as far as possible try to comply with any requests of the employee.

Holidays, time off, etc., that were completed during the period in which the compensation is requested, are included in the calculation of the 5 days.

For employees who will be sent home on periods shorter than 3 months, the days are calculated in proportion to the lengths of the specific period.

If most of the concerned employees or an employee representative has made an agreement on a salary reduction before applying for the salary compensation scheme, the employee must not take the 5 days. The salary reduction agreement must be entered as a consequence of COVID-19.  

If the period is cut short because the employee resumes to work or the employment relationship is terminated, the employee is subject to the same terms of employment that were in effect at the time before the employee was sent home.

DOCUMENTATION REQUIREMENTS AND APPLICATION

The company must apply for salary compensation to the Danish Business Authority through www.virksomhedsguiden.dk.

The salary compensation is paid based on the companies' information on the number of employees who are in risk of being dismissed due to the COVID-19 situation, but who are sent home instead of being dismissed.

In addition, the company must provide information on the rate of employment, the employees' salaries, the period when the employee has been sent home, as well as a solemn declaration stating that the submitted information is correct. In the application and subsequent auditing, the employees must be registered through the civil registration number (CPR number).

The company must state and justify the period in which the company expects a shortage of work. However, the company can apply for a maximum of salary compensation for a period of three months which commences on 9 March 2020 and ends no later than 9 June 2020.

Companies can apply for salary compensation once during the period from 9 March to 9 June 2020. If the company, oppose to what have been initially assessed, needs to send home additional employees after the application has been submitted, it is possible to apply for salary compensation again.

DOCUMENTATION REQUIREMENTS AFTER THE SALARY COMPENSATION

After the company has received salary compensation, the company must show documentation of the employees' salary level, that the employees have been employed before 9 March 2020, and that the company has sent home the employees during the specified period.

The Danish Business Authority will require that every company uses an accountant. In addition, the accountant work may be required in relation to already submitted documentation.

FOR COMPANIES THAT HAVE ALREADY SENT HOME EMPLOYEES

In addition to this financial relief scheme, the labour market parties and several private companies have agreed that companies can send home employees without the right to salary until the end of March 2020.

Currently, it is not possible to use more than one scheme at a time. Therefore, the companies should consider which scheme will be most beneficial financially – both on a short-terms basis and a long-term basis.

If an employee has already been sent home without salary and the company now instead decides to apply for the compensation scheme, the company only incurs an additional expense corresponding to the difference between the amount the company is compensated and up to the full salary.

FOR COMPANIES THAT ALREADY HAVE DISMISSED OR WILL DISMISS EMPLOYEES DURING SALARY COMPENSATION

Companies may receive salary compensation, even though employees have already been dismissed due to COVID-19. However, the company shall not receive salary compensation for the employees who have already been dismissed, and it is only possible to receive compensation for the period after the dismissals have taken place.

If the company dismisses employees for financial reasons during the period of receiving the salary compensation, the salary compensation for the entire company ends. However, the company does not have to pay back compensation already received.

It is indeed in the interest of the government and the labour market parties that Danish companies will postpone any decisions on dismissals to the full extent and keep employees in employment during the current crisis.

Lund Elmer Sandager monitors the situation closely and will continuously make updates on the situation. If you have questions about the temporary rules or other employment law issues, please do not hesitate to contact our specialists Partner, Attorney Michael Møller Nielsen, Attorney Julie Flindt Rasmussen, Assistant Attorney Marta Valgreen Knudsen and Assistant Attorney Nikolaj Sommers Gjettermann.

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