Temporary salary compensation to corona-inflicted companies

The outbreak of the coronavirus (COVID-19) has already inflicted great economic damage and is continuing to cause dramatic declines in productivity and earnings, and, as a result, a great number of redundancies. The Danish government has entered into a new tripartite agreement with the Danish social partners, which allows them to introduce a temporary salary compensation scheme for employees who would otherwise face mass redundancy. Combined with several other initiatives, the tripartite agreement is an important measure from the government to mitigate the effects of this extraordinary situation on the Danish labour market.

Companies that are extraordinarily financially affected by the outbreak which would otherwise need to proceed to mass redundancies of at least 30 % of the workforce, or at least 50 employees, are eligible to participate in the salary compensation scheme. As opposed to other schemes, this scheme does not require any collective bargaining agreement or similar.

Companies that want take advantage of the scheme will be required to send the affected employees’ home with full pay. It is a condition that the affected employees do not work during the period they are sent home.

The salary compensation scheme will give companies access to salary compensation from the state:

• Up to 75 % (but maximum DKK 23,000) for monthly paid employees
• Up to 90 % (but maximum DKK 26,000) for hourly paid employees

As part of the agreement, the affected employees are required to take annual leave or time off in lieu corresponding to five days during the compensation period. If the employee doesn’t have any accrued annual leave or overtime, the employee will be required to take five days without pay or to use days from the new holiday year. During these five days, the company will not receive salary compensation. It is also a condition, that the company does not terminate the affected employees for financial reasons during the compensation period.

It is a condition that participating companies refrain from applying any other scheme which allows companies to send employees home without pay, such as work-sharing schemes and unpaid leave schemes.

Participating companies will later be required to document that the affected employees did not work during the compensation period, with the assistance of an accountant.

The temporary salary compensation scheme will be available from 9 March to 9 June 2020. Companies will need to apply for compensation through virk.dk. The Danish Business Authority is expecting to be able receive applications from middle of week 13 and will begin pay-outs from the week after.

Aside from the tripartite agreement, the Danish government has introduced several other measures, among which are:

• 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

On today’s press conference, the government confirmed, that more initiatives are underway. We are monitoring the development closely and we will follow up when there are news to report.