In continuation of the conclusion of the tripartite agreement of 14 March 2020 on financial aid to corona-affected employers and their employees, the Danish Government has just now proposed a bill which is to implement the said tripartite agreement. The bill is expected to be adopted on Tuesday, 24 March 2020.
As follow-up on the tripartite agreement, the Finance Committee of the Danish Parliament adopted on 17 March 2020 Document no. 108 on adoption of a temporary wage compensation scheme (the "Document"), according to which undertakings may receive partial compensation for payroll expenses for employees under the threat of dismissal as a consequence of COVID-19.
By way of the Document, a temporary wage compensation scheme is set up the amount of which totals DKK 3.8bn in 2020 for undertakings having employees under the threat of dismissal. The scheme is effective as from 9 March to and including 9 June 2020.
The purpose of the bill is, among other things, to determine the legal position between employees and employers subject to the wage compensation scheme.
Who is covered by the wage compensation scheme?
It appears from the bill that the wage compensation scheme applies to all private undertakings registered in the Central Business Register.
The wage compensation scheme applies to the private undertakings in Denmark facing having to give notice of termination to a minimum of 30% of its staff or to more than 50 employees.
The Danish Minister for Industry, Business and Financial Affairs has announced that the computation of either 30% of the employees or 50 employees must take place on the basis of civil registration numbers and not based on the undertakings’ man-years.
What is inferred by the wage compensation scheme?
The wage compensation scheme is structured as follows:
- Salaried employees: The compensation from the Danish State amounts to 75% of the salary of the employees in question (however, with a cap of DKK 23,000 per month per full-time salaried employee covered by the scheme)
- Non-salaried employees: The compensation from the Danish State amounts to 90% of the wages of the employees in question (however, with a cap of DKK 26,000 per month per full-time employee covered by the scheme)
The undertakings may be covered by the aid scheme for a maximum of three months.
The wage compensation scheme applies to the employees who would otherwise have been dismissed as a consequence of the COVID-19 situation, but who are instead sent home.
What are the conditions of the wage compensation scheme?
The wage compensation scheme is, among other things, conditional upon the following terms:
- Full wages: The undertakings in question must still pay full wages to employees during the compensation period even though they may have been affected extraordinarily hard financially by COVID-19. The employees in question have consequently not been terminated.
- No use of existing options: The undertakings may not use any existing options of sending home employees without pay.
- Five working days: The individual employee for whom the undertaking applies for wage compensation must use five days of holiday and/or time off in lieu of overtime pay in connection with the compensation period. The employee may decide whether the five days must be used as accumulated holiday, time off in lieu of overtime pay, unpaid leave, etc. In events where the employee has no holiday, time off in lieu of overtime pay, etc., unpaid leave can be taken or days from the new holiday year can be used.
- Opting out of dismissals due to financial difficulties: When being subject to the wage compensation scheme, undertakings cannot dismiss employees as a consequence of financial difficulties. If such dismissals take place, the wage compensation scheme will cease to apply.
As for the period in which the employee does not receive any pay, the bill proposes that the employer must, following negotiations with the employee, decide which period is concerned. It is a requirement, however, that the period falls in the period in which the employee is sent home.
The period must consequently fall proportionately over the period in which the employee is sent home, and, with due regard for the undertaking's affairs, the employer must to the extent possible accommodate the employee's requests in that respect.
This means that, ultimately, the employer decides in which period the five days without pay must fall, provided, however, that the days must fall proportionately, meaning that if the employee is sent home for two months, the five days must fall evenly throughout the period.
Since the wage compensation scheme is effective as from 9 March to 9 June 2020, it is suggested that any accumulated holiday, time off in lieu of overtime pay or other accumulated time off which has been taken during this period is included in the calculation of the "five working days". If an undertaking consequently applies for wage compensation for a period prior to the effective date of the Act and in which period the employee, for example, upon agreement with the undertaking, has taken holiday when being sent home, such days may be included in the calculation of the "five working days".
Any wage compensation under the wage compensation scheme is also conditional upon the employee for whom the employer receives wage compensation being sent home in the period for which compensation is received and upon the employee not working in the period in question.
Finally, the employee must have been employed prior to 9 March 2020.
Which notice applies to employees who are sent home?
The bill proposes that an employer receiving compensation under the wage compensation scheme is entitled to send an employee home in accordance with the conditions laid down in the bill, irrespective of what otherwise follows from provisions in collective agreements, other legislation, or what has otherwise been agreed upon between the employer and the employee.
Employees may be sent home at one day's notice.
When does the wage compensation scheme become effective?
It is proposed that the wage compensation period starts upon the first affected employee being sent home and ends on the day when the undertaking gives notice of termination or terminates employees for financial reasons or when the scheme expires on 9 June 2020.
As for the question of how many times an undertaking may apply for wage compensation, it appears from the bill that the undertakings in question may, as a general rule, only apply for wage compensation once during the period from 9 March to 9 June. In the event that undertakings need to send home more employees than first applied for, the undertakings may apply for wage compensation again.
Which rules apply in the event that the period in which the employee is sent home is suspended?
In events where the period in which an employee is sent home is suspended, for example, due to the fact that the employee resumes work, the employee will be reinstated in the terms of employment applicable at the time when the employee was sent home.
Which rules apply to documentation?
The undertakings wishing to apply for wage compensation must, among other things, be able to provide the following information/document as follows:
- The undertakings must state and justify in which period they expect shortage of work.
- In the application and the subsequent audit, the employees must be registered under their civil registration numbers.
- Following payment of wage compensation, the undertaking must document the employees’ pay level, that the employee was employed prior to 9 March 2020, and that the undertaking has sent the employees subject to the scheme home in the period stated.
In addition, the Danish Business Authority has a right to order any undertaking having applied for wage compensation to receive auditor assistance in connection with the provision of documentation of the various information.
The undertakings must file an application for wage compensation with the Danish Business Authority. Such applications may be filed online, expectedly as from next week.
Other aid schemes
If an undertaking applies for wage compensation under the wage compensation scheme, the undertaking cannot receive compensation for the same costs under other aid schemes adopted as a consequence of COVID-19.
Comments by Bech-Bruun
The many undertakings already now facing serious financial challenges as a consequence of COVID-19 should look into the extent to which they may be covered by the wage compensation scheme and whether it is the proper aid scheme to make use of. For more information If you have any questions, you are welcome to contact Lise Lauridsen, Morten Ulrich or Sandro Ratkovic. You are also welcome to get in touch with your Bech-Bruun contact.