Gross benefits — one of the most underused HR tools available

There’s a tool many Danish employers are familiar with but rarely use strategically. It costs nothing extra to offer, it’s highly appreciated by employees, and it strengthens your competitiveness in both recruitment and retention. Yet it often ends up at the bottom of the HR agenda.

We’re talking about gross benefits, or bruttolønsordning as it’s known in Denmark. Here’s why it’s time for employers to take it seriously!

But first, what’s gross benefits?

Gross benefits, also known as bruttolønsordning, is an arrangement that allows employees to purchase certain benefits directly through their gross salary, before tax is calculated. Instead of receiving their full salary in cash and buying benefits with taxed money, employees can have the cost deducted at source, meaning they effectively pay less tax and get more value for the same gross salary — at no extra cost to the employer.

Common benefits that can be included are:

• Mobile phone and broadband
• Public transport pass
• Massage and wellness
• Training and professional development
• Newspapers and professional literature
• PCs and tablets
  
  

The advantages for employers

There are several strong reasons to use the gross benefits scheme as an active HR tool:

A stronger benefits offering at no extra cost. Because the employee takes a salary reduction, the arrangement essentially pays for itself. Employers can offer attractive benefits without increasing payroll costs.

Competitive edge in recruitment. A well-designed benefits package signals that you, as an employer, care about employees’ whole lives, not just their salary. That argument carries increasing weight in a tight labor market where the battle for talent intensifies.

Improved employee satisfaction and retention. Benefits that are actually used and feel valuable strengthen engagement. The bruttolønsordning gives employees the opportunity to choose benefits that fit their own life situation.

Reduced payroll costs. Because the gross salary is reduced, the employer’s lønsumsafgift (payroll tax) and, in some cases, pension contributions may also decrease, creating an indirect saving.

Rules HR needs to know

For a gross benefits scheme to be valid from a tax perspective, a number of basic conditions must be met:

• Written agreement — the arrangement must be documented and legally valid.
• Minimum 12-month commitment — the scheme must run for the full salary agreement period, as a rule of thumb, at least 12 months.
• Fixed salary reduction — the deduction must be a fixed monthly amount and cannot be adjusted based on the employee’s usage of the benefit.
• Agreement must be made in advance — the arrangement cannot apply retroactively to salary the employee has already become entitled to.
• The employer owns the benefit — it’s the employer who provides the benefit, not the employee who purchases it and is then reimbursed.

It’s also important to check that the arrangement is compatible with any collective agreements that apply to the employment relationship.

Common pitfalls

There are a few mistakes HR should avoid:

• Adjusting the salary deduction during the agreement period. If the cost of the benefit changes, for example, if a supplier raises their price — the additional cost falls on the employer. The deduction cannot be changed.
• Offering benefits with limited tax advantage. Not all benefits are equally favorable in a gross benefits scheme. Computers, for example, are significantly less advantageous than massage, training, or public transport passes. Always check the tax implications for each benefit.
• Overlooking the impact on pension and holiday pay. Because the gross salary is reduced, it may affect the pension basis and holiday entitlement. It’s important to communicate this clearly to employees.
  
  

How to get started

It doesn’t have to be complicated to implement a gross benefits scheme. Here’s a suggestion on how to start:

• Map out what employees actually want, which benefits are in demand and which would deliver the most value?
• Review relevant collective agreements — check that the arrangement is compatible with any applicable collective bargaining agreements.
• Create a written agreement template — standardize the process to avoid mistakes.
• Communicate clearly — make sure employees understand how the arrangement works, what the salary reduction means, and how it affects pension and holiday pay.

The importance of technology

Once the structure is in place, integrating your gross benefits scheme into your benefits platform is the natural next step, and it makes all the difference. With the right technology, employees can easily see what’s available, understand the value of each benefit, and make their choices — all in one place. It removes friction, increases engagement, and ensures that the benefits you offer are actually used. Without the right technology, even the best gross benefits offering risks going unnoticed.

At its core, a gross benefits scheme is simple: it gives employees more value for their money and gives you as an employer a cost-effective way to strengthen your benefits offering. All it takes is making the decision to use it strategically.

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