Reimbursement of sick pay to employers

Short answer

When an employee falls ill, the employer generally pays their salary or sick pay for the first 30 calendar days – the so-called ‘employer period’. After that, as an employer, you can receive sick pay reimbursement from the local authority, provided the employee meets the employment requirement. In special cases, you may be eligible for reimbursement from the first or second day of absence – for example, under a Section 56 agreement or Section 55 sickness benefit insurance. The main pitfall is late notification, which could cost you your reimbursement.

The employer period – the first 30 days

The general rule is that the employer is responsible for covering the cost of wages or sickness benefit for the employee’s first 30 calendar days of sick leave. This applies regardless of whether you pay full pay during sickness or “only” sickness benefit. Only after the employer’s contribution period has ended can you claim a refund from the local authority – and only if the employee is entitled to sickness benefit and meets the employment requirement. If you pay wages during sick leave beyond the 30 days, you take over the employee’s entitlement to sickness benefit and can receive a reimbursement equivalent to the sickness benefit the employee would otherwise have received. The reimbursement cannot exceed the sickness benefit rate, so you will have to cover any shortfall up to the full salary yourselves. You can find the current rates at borger.dk.

When will you receive a refund from the first day of absence?

There are four typical situations in which the employer’s contribution period does not apply, and you can claim a refund from the first full day of absence:

• Once a Section 56 agreement for a chronic or long-term condition (see below).
• When the illness is pregnancy-related.
• When the employee is employed by flexible working arrangements.
• Once the employee has been employed under 8 weeks and are not entitled to sick pay.

Section 55: Sickness benefit insurance for small private employers

Smaller private companies can take out a sickness benefit insurance under Section 55 of the Sickness Benefit Act. This entitles the employee to reimbursement from the local authority from the second day of absence – rather than having to wait until after the 30 days. The aim is to offset the financial consequences of sick leave in businesses with few employees, where a single case of long-term sick leave can have a severe impact.

Eligibility depends on the company’s total wage bill, which must not exceed a certain threshold that is adjusted annually. The insurance is administered by Udbetaling Danmark, costs a percentage of the wage bill, and the cost is tax-deductible. You can take out the policy at virk.dk. Please note that the insurance does not cover a child’s first day of sickness or maternity leave. You can find the current payroll thresholds and premium rates at virk.dk.

Section 56 agreement: reimbursement from the first day in the event of chronic or long-term illness

If you have an employee with a chronic or long-term condition that results in increased sick leave, you can enter into a Section 56 agreement. It entitles the employer to reimbursement from the first full day of absence, but only for absences resulting from the condition covered by the agreement. A Section 56 agreement may, amongst other things, be entered into when:

• the employee’s risk of illness is significantly increased due to a long-term or chronic condition, and the absence is estimated to result in at least 10 days’ absence in a year, or
• the employee is to be admitted to hospital or receive treatment, and this was decided at the time of recruitment, or
• the employer has already paid wages or sickness benefit for 21 days in respect of the same condition within the last 12 months.

The agreement must be in writing, concluded between the employee and the employer, and approved by the employee’s local authority. It is valid for up to two years at a time and is linked to the specific condition and the specific employment relationship. You must still report the absence in the usual way.

How to make a claim – and avoid losing your refund

Refunds can be claimed online via Easy Refund on virk.dk. The most common – and most costly – mistake is submitting the claim too late: if you submit it after the deadline, you may lose all or part of your refund, or it will only be paid from the date the local authority receives the claim. The deadlines depend on the situation, including whether you pay wages during the absence. Check the applicable deadlines on virk.dk, and establish fixed procedures for reporting sick leave so that no notification falls through the cracks.

When sick leave drags on

When an employee has been off sick for 22 weeks within a 9-month period, the local authority reviews the case, and the employee may be transferred to a work assessment programme with a lower reimbursement rate – unless one of the conditions for an extension is met. This makes it particularly important to keep track of both deadlines and the status of long-term cases.

We’ll help you with your refund

Sickness benefit reimbursement is one of those areas where small mistakes can cost you real money – a missed deadline or a missing Section 56 agreement can really add up. At Dansk Løn Service, we keep track of claims, deadlines and reimbursements as an integral part of our payroll processing, so you receive the money you’re entitled to without having to spend any time on it yourselves. If you want to get it right, then Read about outsourcing payroll or Contact us.

The rules have been simplified here. If in doubt, always seek specific guidance from your local authority, Udbetaling Danmark or a payroll officer.