Denmark: COVID-19 New Three-Party Agreement On Division Of Labour

Introduction

Labour division entails reduced working hours for a limited period without laying off the employees in question, and the employees remain engaged with the company for the entire period.

This three-party agreement, which has just been entered into, thus aims to compensate for the consequences of the expiry of the salary compensation scheme on 29 August 2020.

What does the three-party agreement entail?

The agreement entails that employees – engaged with the companies choosing to apply the scheme – will work between 50 and 80 per cent averagely of the agreed working hours over a period of 4 weeks. The labour division must apply a specific percentage for such 4-week period, but the percentage may be changed for the following 4-week period. As to the remainder of the working hours, the employees are laid off temporarily receiving unemployment benefit.

An employee will therefore receive full salary when he/she works and the increased unemployment benefit rate for the remaining time. In the weeks without employment and with the unemployment benefit, the employee will receive up to the equivalent of DKK 23,000 per month for a full-time unemployed person. This adds up to approximately 120 per cent of the highest rate of unemployment benefit.

The employees subject to the labour division in accordance with the temporary scheme will fully enter into previously agreed rights after the expiry of the labour division period. The employee remains employed and accrues seniority as usual during the labour division period. If an employee does not want to enter into this labour division scheme, the company must decide whether to terminate the employee. This is also required if the employer increases the unemployment period from any one 4-week period to another. The employee will in both cases have 24 hours on a workday to decide whether to enter into the scheme.

The employers will receive a fixed contribution from the State corresponding the amount of 3 unemployment compensation days (also in Danish referred to as “G-days”) (usually paid by the employer) per month per employee covered by the scheme. The contribution is calculated proportionally to the effect that the contribution is reduced if an employer does not use the labour division scheme for a whole calendar month. In practice, the scheme entails that the employer pays the unemployment compensation day amount to the employee who will not receive the unemployment benefit those days. The State will cover the difference between the unemployment benefit amount and the amount of the unemployment compensation day. Unemployment compensation day amounts must be paid out with the regular salary for the period including the unemployment compensation days. The employers will not have to pay for the unemployment compensation days the first month, but will have to pay 2 unemployment compensation days per month the rest of 2020.

It has also been agreed to provide for better options of training in both the new and the existing schemes by letting persons covered by the labour division schemes in cooperation with employers implement and complete upgrading training sessions scheduled in whole or in part for periods when the employee is not working and receiving the unemployment benefit.  

This will be a supplementary scheme available along with the existing labour division scheme. Any terminated labour division arrangement under the existing scheme does not prevent labour division pursuant to the new temporary scheme. A business unit may not, however, apply both labour division schemes for the same periods.

Who may be covered by the scheme?

The scheme, which will remain in force the rest of the year, may apply to both employees paid by the hour and salaried employees on the private labour market. Also persons not insured against unemployment may be covered by the scheme if they become members of an unemployment insurance fund and pays the subscription fee

The parties have agreed that the labour division scheme is implemented by law and thereby allowing for coverage of the entire private labour market regardless of limitations, if any, already stipulated by collective bargaining agreements or legislation. The new scheme will thus cover all employees on the private labour market, including groups covered by collective bargaining agreements and non-covered groups.

Employers wishing to apply the scheme must inform and hear their employees according to rules applying in cooperation agreements, equivalent agreements or the Danish Act on Information and Hearing.

When does the agreement apply?

The new temporary labour division scheme is implemented as soon as possible and will remain in force until 31 December 2020 with an option of already established labour division arrangements continuing in 2021 with a maximum duration of 4 months.

Labour division arrangements under the temporary scheme must be initiated no later than on 31 December 2020.

What now?

A bill will be presented as soon as possible to implement the agreement.