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HomeCOVID-19: Compensation scheme for exposed undertakings and business owners

COVID-19: Compensation scheme for exposed undertakings and business owners

18. March 2020

As an additional measure to ward off the economic consequences of the Coronavirus for Danish undertakings, the Government today at 12 noon proposed a temporary compensation scheme for certain fixed costs in Danish undertakings and a temporary compensation scheme for business owners to be negotiated with the other parties in the Danish Parliament. We review the schemes here.

Although not stated directly in the proposals, it is assumed that the new compensation schemes will apply in conjunction with the guarantee scheme (state guarantee for new bank loans) for SMEs and large companies.

Temporary Compensation of Fixed Costs

The proposal implies that exposed undertakings will be able to obtain compensation for certain fixed costs such as e.g. costs related to irrevocable contracts, which will help exposed undertakings to continue their operations in this extraordinary situation. The compensation scheme will cover all business sectors, but is aimed specifically at exposed undertakings experiencing a considerable drop in turnover in Denmark (more than 40%). The compensation scheme is aimed at covering fixed costs and is to cover 25-80% of the costs for a period of up to 3 months. The compensation will be paid out as soon as possible, but will be subject to repayment, if the drop in turnover turns out to be “considerably less”.

Temporary Compensation to Business Owners (Self-employed)

The proposal entails that business owners experiencing a decrease in turnover of more than 30% as a consequence of COVID-19, may receive compensation from the State of 75% of the lost turnover compared to last year’s turnover; however, maximum DKK 23,000 per month. This amount may be increased to DKK 34,500, if the business owner has a spouse employed in the business. The Government proposes that the scheme is to cover small business owners only, without specifying this criteria in detail, except for a requirement that the business cannot have more than 10 full-time employees.  The amount of compensation corresponds to the compensation tariffs in the compensation scheme for wages and salaries agreed with the Danish Employers Confederation and the Danish Trade Union Confederation in the tripartite agreement entered into on Sunday, 15 March 2020. Compensation is to be granted for a maximum of 3 months from 9 March to 9 June 2020. Undertakings must apply for compensation via the Danish Business Authority’s business portal (virksomhedsguiden.dk). The Danish Business Authority is working on getting ready to receive the first applications soon. Information in this respect will be published on the website: virksomhedsguiden.dk.

The Government’s fact sheets on the temporary compensation schemes are currently available in Danish only (available herehere and here).

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