Denmark to reduce minimum salary for non-EU work permits

A majority in the Danish parliament will support a reduction to a minimum wage requirement on the Pay Limit Scheme, a criteria system used to grant work permits to non-EU nationals.

Finance Minister Nicolai Wammen
Finance Minister Nicolai Wammen confirmed a reduction to the Pay Limit Scheme on Wednesday, broadening opportunities for foreign labour in Denmark. File photo: Emil Helms/Ritzau Scanpix

A majority of parties agreed on Wednesday evening to vote through a rule change that will see the minimum salary requirement on the Pay Limit Scheme reduced, the Ministry of Finance confirmed in a statement.

The agreement means that, as of December 1st, salaries at or above 375,000 kroner per year will qualify for the scheme. That represents a 16 percent decrease from the current pay limit of 448,000 kroner annually.

Based on today’s exchange rates, the new minimum Pay Limit Scheme salary is the equivalent of approximately $52,700 €50,400 or £43,400.

The lowered threshold will exist on a trial basis for the next three years. 

Political discussions over a change to the minimum salary rule have been ongoing for months, with most parties in agreement that the change was needed to address a labour shortage, but unable to come together over specifics.

“The Danish economy is in a strong position but we are currently experiencing increasing prices and a shortage of labour in Denmark. At the same time, we have set one of the world’s most ambitious climate goals,” Finance Minister Nicolai Wammen said in the statement.

“In that situation it is responsible economic politics to ease strain on the labour market for a while using foreign labour – provided this is in line with Danish salary and employment standards,” he said.

A reduction to the Pay Limit Scheme essentially means that Danish companies can now hire skilled foreign staff on contracts paying an annual salary of 375,000 kroner, and that the foreign employees can be granted work and residence permits on that basis.

Denmark grants work permits through the Pay Limit Scheme to foreigners who are offered high-paying jobs. There’s no education requirement and the scheme applies to all industries, as long as the annual salary requirement is met.

The Pay Limit Scheme is one of a number of business schemes used to grant work permits for non-EU and EEA nationals who are unable to move to Denmark under the EU’s right to free movement.

READ ALSO: How can you get a work permit in Denmark if you are not an EU national? 

The Confederation of Danish Industry (Dansk Industri, DI), an employers’ organisation which represents thousands of Danish businesses, said that the labour shortage was one of the biggest problems facing the economy and therefore welcomed the agreement, news wire Ritzau writes.

An umbrella organisation for trade unions, Fagbevægelsens Hovedorganisation (FH) criticised the deal in comments to Ritzau.

“Politicians are opening the gate to foreign labour on relatively low wages. That creates unnecessary pressure on wages at a time when there are already a record number of foreign workers on the Danish labour market,” FH chairperson Lizette Risgaard said.

New work permits cannot be granted under the new, temporary Pay Limit Scheme criteria “if gross unemployment exceeds 3.75 percent or if more than 15,000 people make use of it,” the finance ministry said in the statement.

Alongside the Social Democratic minority government, the Liberal (Venstre), Socialist People’s Party (SF), Social Liberal (Radikale Venstre), Conservative, Nye Borgerlige (“New Right”), Liberal Alliance and Christian Democrats have agreed to support the rule changes.

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Unemployment down in Denmark but analysts predict more without work

The number of people without work in Denmark fell slightly in October, with the total of 75,200 lower than September’s figure by 200.

Unemployment down in Denmark but analysts predict more without work

The data from Statistics Denmark therefore show a marginal decrease, which does not translate to a percentage drop in employment according to the agency.

That means 2.6 percent of Denmark’s workforce is still currently unemployed.

“The small drop in October is due to 300 fewer non-activated [not in return-to-work programmes, ed.] and 100 more activated jobseekers,” Statistics Denmark said.

Unemployment appears to still be trending downwards, which analyst Brian Friis Helmer of Arebejdernes Landsbank said was surprising.

“We have an economy that actually looks good but we have sky-high inflation and dreary economic forecasts. So it’s surprising that both unemployment and employment still seem to be withstanding this headwind,” he said.

But it is a matter of time before unemployment begins to creep upwards, according to senior economist Tore Stramer of the Danish Chamber of Commerce (Dansk Erhverv).

“The more forward-looking key metrics for the labour market have unfortunately begun to wobble considerably in recent months,” Stramer said.

“The number of available job notices has fallen by around 22 percent since February and the number of redundancy notices has meanwhile increased to the highest level since the coronavirus crisis in 2020,” he said in a written comment to news wire Ritzau.

The economist said he expects unemployment to go up by between 25,000 and 50,000 by the end of 2023.

An additional 20,000 people could lose their jobs in 2024, he said.

The construction and hospitality sectors could be amongst the most vulnerable,” he said.

Another analyst, Sydbank senior economist Søren Kristensen, also told Ritzau he believes unemployment will go up but said a slight cooling down of the labour market might be beneficial. Denmark is currently experiencing a labour shortage in several sectors.

“But we are concerned this might be a case of more than just a cooling-off,” he said.

“We expect a fall in employment figures of more than 60,000 persons during the course of 2023. They won’t all show up as being unemployed persons but we could easily end up in a situation where interest and inflation combine to catapult the number of unemployed people to over 100,000,” he said.