The Unemployment Benefit Reform (2016)
The reform aims to improve the unemployment benefit system in terms of flexibility, security and modernisation, among others, by focusing on increased transparency and incentive to find work.
The purpose of the unemployment benefit reform is to establish a modern unemployment benefit system which enhances both the mobility and the security of the Danish labour market for the benefit of both employees and employers. Furthermore, increased digitisation will serve to reduce administrative burdens and bureaucracy.
The three main objectives of the unemployment benefit reform are:
- to increase flexibility, which in concrete terms means generating confidence in such a way as more closely than today supports the unemployed in accepting the broad range of jobs offered on ordinary terms on the Danish labour market.
- to create greater security for insured unemployed.
- to modernize and update the unemployment benefit system so it will be simpler, more transparent and easier to manage, and adapted to a more flexible and international labour market.
The first phase of the unemployment benefit reform came into force on 2 January 2017 and the second phase came into force on 1 July 2017.
Entitlement to benefits – 1st of July 2017
One of the main changes implemented in the reform is that the qualifying criteria for access to unemployment benefits are based on “income” rather than “hours worked”. The criterion is an income of at least DKK 223,428 (2017) earned within the past 36 months. However, a ceiling of approx. DKK 18,619 per month (2017) applies, which means that prospective recipients of benefits need to have been employed for at least 12 months.
Hereafter the qualifying criteria for access to unemployment benefits are based upon hours worked.
A requalifying period of at least one year’s membership of an unemployment insurance fund also applies.
Calculation of unemployment benefit rate – 1st of July 2017
Calculation of unemployment benefit rate is based on the 12 months with the highest income within the past 24 months. The aim of this is to ensure that no one is punished for taking temporary low-paid jobs immediately before becoming unemployed. As a consequence, more unemployed people will receive a higher rate of benefit.
In general, unemployment benefit will be paid at a rate of 90 per cent of the recipient’s former income from employment. However, a ceiling applies to a maximum rate of DKK 849 per day (in 2017). Graduates (for whom special qualifying criteria apply) will receive 71.5 per cent of the maximum rate, while graduates who are also parents will receive 82 per cent of the maximum rate.
Benefit period – 2 January 2017
The benefit period is 2 years within a 3-year period with an option to prolong the benefit period by up to 1 year by working for a period of half a year during the benefit period. Hours worked are recorded in an “employment account” that can be exchanged for unemployment benefits at a ratio of 1:2. A tool has been created on jobnet.dk where the benefit period can be calculated.
This can contribute to increased confidence in the unemployment benefit system since the unemployed person is given the opportunity to prolong the benefit period by up to 50 per cent. At the same time, it will contribute to increased flexibility of the labour market, since all types of employment counts, regardless of its duration. In addition, it strengthens the incentive to take any available job, since any job offered on ordinary terms can be used to extend the benefit period, regardless of its duration – (and without the risk of receiving a lower unemployment benefit as a consequence).
Monthly payments – 1st of July 2017
Benefits are calculated on a month-by-month basis and are based upon the number of hours out of each month the recipient did not work.
Additional incentives to take a job while in receipt of unemployment benefits – 1 July 2017
A further incentive to take a job while in receipt of unemployment benefits is that unemployment benefit is suspended one day out of every four months. This can be avoided if the recipient finds employment of at least one week’s duration every month of the benefit period.
Furthermore, if a recipient has received four full years of unemployment benefits within a period of eight years, the benefit period will be shortened by one month.
Transparency for persons receiving benefits – 1st of July 2017
A main focus of the reform is to modernize as well as update the unemployment benefit system. By changing the system from a weekly- to a monthly/based system on the basis of register data (e-indkomst), increased digitisation will reduce administrative burdens.
Furthermore, the transition to a monthly/based system and the intensified use of register data (e-indkomst), also means that it is possible to build a better information base adapted to the individual circumstances of the recipient, which includes all relevant information the recipient may require, via the creation of an “employment account”.
Via an employment account, the recipient can get an overview of relevant information, e.g. how many hours they have worked in a given period; how many hours of work are needed to avoid suspension of unemployment benefits; when the suspension of unemployment benefits is triggered; and when the recipient will qualify for a new benefit period. Awareness of these factors is expected to provide the recipient with an incentive to take the decision to accept any available job during the benefit period.
Partial/temporary unemployment benefits – 1st of July 2017
It is possible to receive partial/temporary unemployment benefits in several circumstances, e.g.:
- involuntary reduction of working hours;
- part-time work accepted to avoid full unemployment;
- interruption of work for meteorological reasons.
- the monthly payment is reduced in proportion to the hours worked. The recipient is entitled to receive partial unemployment benefits for 30 weeks out of a period of 104 weeks.