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Coronavirus: agreement on new work distribution scheme reached in Denmark

By Yvonne Frederiksen, Firm: Norrbom Vinding

The Danish Government and the social partners recently reached a tripartite agreement to establish a new temporary work distribution scheme in order to prevent dismissals.

Earlier this year, the rules on work distribution laid down in the executive order on payment of unemployment benefits were eased to allow partial furloughs and thus avoid the need for dismissals during the Covid-19 pandemic. You can read about those rules here.

Based on the tripartite agreement, a new work distribution scheme will be established by statute, and all employers will be able to use his scheme. Employers may still apply the existing work distribution rules, but not concurrently with the new rules.

Establishment and scope

According to the tripartite agreement, employers must inform and consult with the relevant employees in accordance with the rules in any applicable cooperation agreements or the law. If, after the information and consultation process, an employee does not wish to take part in a work distribution plan, the employer can either choose to dismiss the employee or refrain from using the plan altogether. This is because, under the new rules, the plan must cover all of the employer’s employees, an entire department or a specific production unit.

The requirements for the employees’ work rotation plans will change under the new rules. It will be a requirement that the employees are furloughed for 20-50% of their usual working time calculated on the basis of four-week periods. The employer may change this percentage rate after each four-week period. In this context, it is important to bear in mind that employers can only require employees to work outside their usual working hours if they agree to this.

As a starting point, new employees hired during the term of an ongoing work distribution plan will automatically be covered by that plan. Accordingly, the employment may be made conditional on the employee accepting the plan. Employers will not be allowed to use temporary workers or to hire new trainees or wage-subsidised employees during the term of a work distribution plan.

Work distribution plans of a duration up to four months can be agreed without approval from the Regional Labour Market Council. Employers can report a work distribution plan under the new rules until 31 December 2020, which means in practice that a work distribution agreement may run through April 2021. The parties to the tripartite agreement have agreed to meet again in November 2020 to discuss the possibility of extension of the scheme.

Employers’ contributions and transitional scheme

Under the previous work distribution scheme, employers’ duty to pay two of the so-called ‘G-days’ (i.e. days of unemployment) to employees in connection with a work distribution plan was suspended until 1 September 2020. This duty was reinstated as of 1 September 2020.

Under the new work distribution scheme, however, employers will be required to pay three G-days per month to employees (calculated on a prorated basis if the employee is not covered by a work distribution plan for an entire month). In 2020, one G-day amounts to DKK 881 for a full-time employee.

Employers covered by a work distribution plan under the existing rules as at 31 August 2020 can transfer to the new scheme before the end of September 2020. In such case, no G-days will be payable for the first month of the employer’s new work distribution plan and, likewise, for the remainder of 2020 only two monthly G-days per employee must be paid.

Consequences for employees

Employees covered by the new work distribution scheme will receive supplementary unemployment benefits during the part-time furlough period and, for these employees, the maximum unemployment benefits rate will be increased to DKK 23,000 per month for an unemployed full-time employee. The evaluation of whether an employee is entitled to supplementary unemployment benefits will still be made by the unemployment insurance funds.

Employees who are non-members of unemployment insurance funds will have the option of joining such funds with retroactive effect.

The normally applicable time limits relating to employees’ right to unemployment benefits are currently suspended, both under the existing and the new scheme. This means that employees are not at risk of exhausting their right to unemployment benefits whilst working under a work distribution plan.

Additional requirements and implementation

In addition to the above-mentioned changes, the former requirements for work distribution plans, including the duty to notify the local job centre, still apply.

As mentioned above, it is stated in the tripartite agreement that the new work distribution scheme will be laid down by statute. It is expected that a bill on the new scheme will be tabled soon.

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