“AFU” – the new contribution on the social security bill
As of 1st July 2016 a new contribution will be added to the social security cost, which will provide security for posted workers in Denmark. In the event their employer neglects to pay their salary the newly established AFU (“Arbejdsmarkedets Fond for Udstationerede”) will under certain criteria cover the salary and make payments to the employee.
Both Danish companies and foreign employers (within EU/EE) working in Denmark are required to pay the standard fee. The fee is relatively low at DKK 9.00 (Q3 ’16) and DKK 2.30 (Q4 ’16) per full time employee.
Consequences for not paying the correct salary (additional fees and public directory)
Danish companies, who have entered into agreements with foreign employers in a way so that they become assignor (“Hvervgiver”) will under certain criteria be required to pay additional contributions to AFU if the foreign employer neglects to pay salary to the employees. If the Danish company has ceased to exist or is bankrupt, the claim will be presented to the parent company if such exists.
The added contribution will initially be 25 % of the missing salary with the possibility of becoming 50 % depending on the foreign employer’s history as not having paid salary to its employees.
Foreign employers, who have not been paying correct salary will face the risk of being published on the public directory. Danish companies looking for foreign sub-providers are being recommended to review the list prior to engaging into any contract with a foreign provider. Furthermore, the Danish assignor will notified if the foreign employer is reported in a case of missing salary.
Foreign employees can be covered by AFU if they are not paid correct salary
A posted employee can recover wages from AFU when:
- The employee’s work is covered by a collective agreement
- Wages are determined by the Labour Court
- The foreign employer is a company registered in an EU/EEA country
- The employee has tried (unsuccessfully) to get paid wages from the foreign employer
- The failure to pay is not obsolete, which generally occurs after 5 years.
United Tax Network – Denmark can assist with
- Evaluation of the social security coverage
- Registration of the foreign employer
- Monthly payroll and reporting
- Tax evaluation and determination of compliance liabilities
- Tax compliance
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Relevant Resources
[Danish] Official site for AFU [English] Official site for AFU
Image by: FreeImages.com/Anna H-G
