New law bans use of employee benefits when calculating salaries

IMPACT – MEDIUM

What is the change? The Danish Parliament has passed a law to change the way gross salaries are calculated under the Pay Limit and Fast-track schemes.

What does the change mean? Under the new law, employer-paid housing, transportation or other employee benefits cannot be counted when calculating the base yearly minimum of 34,067 kroner (about US$5,150) per month. Companies that use the Pay Limit or Fast-track schemes should take note of the change and plan their budgets accordingly.

• Implementation time frame: The change affects new applications filed on or after July 1.
• Visas/permits affected: New work permit applications under the Pay Limit and Fast-track schemes filed on or after July 1. Current applications and extension applications will not be affected.
• Who is affected: Companies hiring foreign workers under the Pay Limit or Fast-track schemes.
• Business impact: Companies will no longer be able to count accommodations and other employee benefits toward the gross salaries paid to workers under the Pay Limit or Fast-track schemes.

Background: The gross minimum salary for foreign workers under the Pay Limit or Fast-track schemes is currently 34,067 kroner per months (408,800 kroner per year). Before the new law, companies could count accommodations and other allowances toward the salary minimums. A majority of Danish political parties proposed making the change earlier this year, and the law passed June 2. It takes effect July 1.

BAL Analysis: Employers should budget for the changes in base salaries for affected workers. The minimum gross salary must be paid into a Danish bank account, but any pay over and above the minimum may be paid into a foreign account. While benefits cannot be calculated toward the salary minimum, employers do have the option of paying their employees the minimum salary and requiring them to be responsible for their own housing, transportation and other costs previously paid by employers. Those who cannot meet salary minimums under the Pay Limit Scheme may want to consider the Positive-list Scheme as an alternative.

This alert has been provided by the BAL Global Practice group and our network provider located in Denmark. For additional information, please contact your BAL attorney.

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