Coronavirus/COVID-19: Compensation rules in Denmark for salaries when employees are sent home

In this blog we are going to walk you through some of the public information that’s available now, which relates to being compensated for salary costs during the Coronavirus crisis.

The information we are giving is public, but for now it has only been published in Danish, so this is just an attempt to help our English speaking clients to understand the rules better.

Below you will find a link to the official website for the compensation and aid packages, so you can see if there has been any changes after this blog was made (our blog was published on 17.3.2020):

Link to government information (in Danish language)

Coronavirus/COVID-19: Compensation rules in Denmark for salaries when employees are sent home

Do I need to terminate my employees?

The compensation option for salaries relates to companies, that otherwise would be in a situation where they would have to terminate at least 30% of all their employees or more than 50 employees. So for our clients, the 30% rule will be most relevant.

So if you are in a situation where there is no work, and you otherwise would have to terminate your employees, then you can send the employees home instead.

You need to keep paying them a salary.

And you will be compensated later.

What period can you be compensated for?

The period of the compensation will be from the 9th of March 2020 until the 9th of June 2020, at least for now.

It may be prolonged, but for now it is three months.

The application for the compensation will be submitted online.

We don’t know exactly where yet, but we expect it will be on – but it’s not clear yet, so hopefully something will be announced pretty quickly.

The indication is, that we can apply for compensation already from next week, so that will be week 13, 2020.

Again it’s not clear exactly what day it will be, so we are following the information that’s being made public and we will advise our clients when and how to apply for compensation.

How much salary do you need to pay your employees during the compensation period?

The rule is that when you send the employees home, and you announce that there is no work to be done, you still need to pay them the full salary that they had before the crisis.

You are not allowed to lower the salary – you have to keep paying them the same salary as beforehand.

How much compensation will you get?

Compensation is divided into two different groups.

The first one is the employees hired on a fixed salary per month. The compensation for fixed salary employees is 75% of the total salaries, but maximum 23.000 DKK per month per employee.

If you pay your employees per hour, then the salary compensation is maximum 90% of the salary, but there is a maximum here of 26.000 DKK per month per employee.

There is no rule that employees have to work full time to get the compensation, so even if you have part time employees, you are still eligible for compensation.

Are you are eligible for compensation, if you only have one employee?

For now, the answer is yes, you are eligible. Because if you would send your only employee home and announce there is no work to be done, then you have sent home 100% of your workforce, and the limit was 30%.

Be aware that sole proprietors – meaning companies that are not limited liability companies – for now, are not part of this compensation plan here.

There will be some other compensation and aid packages announced for sole proprietors, but for the salary compensation, it is only for employees.

Can I be compensated, if I am the managing director and the only employee?

We also have some clients where there is only one person working – that’s the managing director and the owner.

It’s not been 100% clear for us if the managing director can get compensation as well, because it’s not been written clearly.

But we’ve asked around and it seems like that will be the case. At this point we cannot say if that will be 100% the case, but the indication is that the managing director also is able to get the compensation. The challenge is of course that we need to prove at some point, that there is no work to be done, and as the managing director we have to assume that you will be carrying out some kind of work – at least management work – and that would automatically take you out of the compensation plan. We aren’t sure how it will be handled, but for now at least the indication is that you are able to get compensated, and we’ll have to see later if they will be more clear on who can and cannot get compensation.

Do you need to be LTD to get compensated for salaries?

As a general reply, the answer is no: all companies that fulfil the criteria are able to apply for compensation.

Just keep in mind that as a sole proprietor – then you are not regulated by these rules.

Can you be compensated for part time employees?

Yes, you are going to get 75% of the total salary cost for the employees that you have sent home.

Will you be compensated for employees that are not hired on a contract?

i.e. employees that come and go as needed.

In general, the answer is no, you are not eligible for compensation for them unless they have employment for more than two days.

Can the employee work during the compensation period?

The answer is no, they are not allowed to work, you have to send them home and they have to be paid a full salary during the compensation period.

It’s also a requirement that you will not terminate any employees during the period you are compensated for. So be aware of that.

Will the employee have to use some holidays during the compensation period?

The answer is yes – the indication is that the employee has to use five days of holiday leave during the compensation period. If the employee is new and does not have any leave acquired yet – then it seems like they will be paying for those 5 days themselves, at least the company is not going to be compensated for those days.

Do you need to pay a pension for your employee during the compensation period?

Yes, you need to pay the normal salary including pensions you were already paying before the crisis. So no changes to the salary – you have to pay exactly the same as before the crisis started.

What documentation will I need in order to apply?

For now, the indication is that you need to state the percentage of employees you will need to send home without work, so you will write for instance 30% or 40%. Remember – it has to be a minimum of 30% or 50 employees.

Then you need to indicate their CPR number and if they work full time or part time.

You also need to write what period you are being compensated for and also the reason why. The reason could be, for instance, ‘due to loss of sales, you have no work to offer employees’.

And finally, there will be a statement that you need to sign where you are swearing that everything you have stated is correct, and after that you will be compensated ‘as quickly as possible’.

So we don’t know at this point how quick that will be – a week, a month – that’s unclear.

And like I said, at this point it’s also unclear where we are going to apply.

So hopefully in the next few days that will be published as well.

What documentation do I need to have after the coronavirus crisis ends?

As it’s been indicated for now, there will be a requirement to document how you used the compensation when the period is done. So it means that you will need to document that you actually sent your employees home without work. How that’s going to be done in real life, we don’t really know and it has not been indicated, but we assume that it will be emails that you have sent out to all your employees with the decision to send them home with full pay – perhaps something like that, but again it’s not very clear. In general, employees have to have been hired prior to the 9th of March 2020, so if you hired someone after the 9th of March 2020, they will not be eligible for the refund.

And finally, they also indicate that the documentation that is provided after the crisis needs to be done ‘with assistance from an auditor’, but we don’t know at this point what that means – if it’s a statement from the auditor, or if it’s just a general recommendation that they would like companies to get help from an auditor or an accountant – that’s not clear yet.

We also called the business authority and asked, and they also were not sure yet. So probably, during the next days and weeks, there will be a more clear instruction on what exactly that means. Because let’s say that companies need, let’s say, an auditor to state something, then there will be a cost for that as well for the auditor.

Can you get compensation for employees who are not a member of a union?

The answer to that is yes – you can be compensated for employees both who are not organised in a union and who are. The only thing is that you have to send them home, and they cannot do any work, and you have to pay them a full salary during the compensation period.

You can see the government websites here where updates are released (in Danish language)

Link to the Business Authority website

Link to the Tax Office website

Do you have any questions to the compensation rules in Denmark for salaries?

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