Below we have listed the different types of incentive payments.
Bonus schemes may take different forms, but in most cases such schemes are contractual, and payment is made according to a fixed formula laid down in the employment contract or determined from year to year. However, for employees who are covered by the Danish Salaried Employees Act, it is important to note that even if the employee has ended the employment during the financial year, the employee is entitled to a proportionate share of the payment which he or she would have received, had the employment not been terminated.
Payment by shares
Payment by shares covers different types of incentive plans, including employee shares, share options and warrants.
A share option scheme entitles the employee to purchase existing shares at a given time at a price fixed in advance, while a warrant entitles the employee to subscribe for new shares at a given price and time. It is characteristic for these kinds of payment that specific criteria must be complied with in order to receive a grant, for instance in connection with the achievement of certain financial or personal targets.
In many share option schemes, it is a condition that the employee is employed by the company at the time of exercising the entitlement. However, the Danish Employees’ Share Options and Warrants Act prescribes that an employee is still entitled to exercise all share options and warrants as if the employee was employed if the employee is a so-called "good leaver". This will be the case if the employee has terminated him-/herself due to the company's material breach, or if the company terminates the employment without the employee being in breach of contract.
In addition to incentive pay, it is worth considering various kinds of “non-financial” benefits. Such benefits are considered a part of the employee’s remuneration and are therefore taxable if they have a financial value. Therefore, it is important for you as an employer to be aware of the Danish tax regulations relating to the various employee benefits.
The most common employee benefits are company car, free mobile telephone, private internet connection, newspapers, health expenses paid by the employer and employer’s contribution to lunch costs.