Article
What is a Gross Salary Scheme?
A gross salary scheme is a salary restructuring arrangement where employees can receive part of their salary in the form of products, services and/or subscriptions.
Read along here and find out
Where most companies hesitate when it comes to gross salary schemes is when the conversation turns to tax rules, administration and distribution of responsibility. And we think that is a real shame, as it is actually not as complicated and difficult as it may sound.
The phenomenon from the late 90s has only increased in popularity due to technological development and a rise in opportunities for working from home. And of course, inflation and rising prices on everything also contribute to this.
It is typically managers, responsible employees and/or decision-makers from HR, IT and finance who benefit the most from offering gross salary schemes to their employees, regardless of the size of the company. So if that in one way or another is you, then you have come to exactly the right place: hello and welcome!
What is a Gross Salary Scheme?
A gross salary scheme gives the employee the opportunity to receive a work computer, home office furniture, a massage scheme, travel card etc. through their gross salary.
In this way, the employee saves their tax rate on the benefits (the products, services, subscriptions, whateveryouwannacallit), because they pay with their salary before paying tax.
You can easily create gross salary schemes yourself for your company. However, it requires a lot of time and resources for purchasing products, administration of employees and benefits, not to mention payroll work for each employee’s gross salary deduction.
That is why it is also possible to have an external company handle all the practical aspects of a gross salary scheme, so you and your colleagues can spend your energy on your 55 other tasks.
The benefits of a Gross Salary Scheme
Flexibility in purchasing:
A gross salary scheme makes it more flexible for companies to meet all employees’ wishes for optimal work equipment, which can make their working life (and actually also their private life) even easier.
Maybe you have tried buying work phones for your employees and ended up in trouble because you bought the same phone for everyone. So both your payroll department and your content creator have received an iPhone 11 as a work phone. That may be fine for payroll, but in 2026 an iPhone 11 is basically an ancient relic in e.g. the creative industry.
Yes, you do save time by standardising purchases. Then you do not have to collect all employees’ wishes in an Excel sheet and chase offers. But what do you do when the equipment does not match your employees’ needs from the start? Is it then just “too bad”?
A gross salary scheme may not be the easiest solution to understand at first. (We are at least doing our best!). But in return, it can make it significantly easier to avoid wrong purchases, keep track of the budget and ensure that employees get the right equipment that fits their specific tasks and needs.
If you want to avoid more wrong purchases and spend less time on budgeting, then we have a really good suggestion for a gross salary scheme for you and your company.
Job satisfaction and productivity:
A gross salary scheme is a strong tool for keeping your employees both productive and efficient. You give your employees more freedom to choose their equipment themselves, which best suits their specific tasks. In this way, you create a working environment where your employees thrive more, because they to a much lesser extent have to spend their time on stupid technical limitations and frustrations.
Competitive salary packages:
You can also offer a gross salary scheme as part of the salary package when negotiating salary. By giving your employees the freedom to choose their own equipment through their gross salary, you strengthen your company’s position as an employer of choice. A gross salary scheme gives your salary package more value for money in the end.
And it is also not a bad thing to highlight in the recruitment process when you need to attract the right candidates for the job. Your employer branding stands out from the crowd of the friendly atmospheres and company lunch programs, which is just about as powerful as writing “Word” under IT skills on a CV (at least in Denmark)
Tax rules and requirements you need to understand
This is where most companies drop off when it comes to gross salary schemes, because something like “saving tax/your tax rate” can sound shady or illegal. So let us debunk those prejudices about gross salary scheme that have built up over time:
- No, gross salary schemes are neither illegal nor a form of tax fraud.
- Yes, gross salary schemes are approved by the Danish Tax Agency.
How a Gross Salary Scheme Works
A gross salary scheme runs over a fixed period of either 12, 24 or 36 months.
Each month, the employee is deducted a fixed amount from their gross salary, corresponding to the value of the benefit distributed over the period.
It is the company that provides the benefit to the employee, so in principle it is also the company that owns the benefit while the scheme is active.
When the scheme ends, the employee can choose to buy the benefit out of the scheme or return it to the company. After that, they can start a new scheme with new benefits.
Tax rules for Gross Salary Schemes
In order for you and your company to offer a gross salary scheme AND sleep well at night, it is important to know and comply with the Danish Tax Agency’s conditions for a gross salary scheme.
- There must be a future reduction in the employee’s cash salary. You cannot give your employee a phone as a kind of bonus in addition to their salary.
- The reduction in the employee’s cash salary must be determined in advance and must not be adjusted once the scheme has started.
- Even though the Danish Tax Agency gives you the green light for a gross salary scheme, you must ensure that your employees do not end up earning less than required by your collective agreement. A gross salary scheme must never mean that the employee’s salary falls below the minimum wage in your agreement.
- The benefit that the employee purchases through their gross salary scheme must be a product/service/subscription provided by the company. The employee may, for example, not pay for a phone costing 6,000 DKK themselves and then ask the company to deduct 6,000 DKK from their gross salary.
- The rules for gross salary schemes only apply to the benefits that can be purchased through such a scheme. They do not apply to tax-free reimbursements for transport, meals and accommodation.
Rules for benefits in a Gross Salary Scheme
For a product or service to be included in a gross salary scheme, it must have work-related relevance. This means that your employees cannot simply buy a curling iron or a gaming console if it does not have direct relevance to their work. Some products can trigger taxationbecause the employee is also allowed to use the products privately.
You therefore cannot compare a gross salary scheme with a discount scheme or buying products in stores for private use. The rules are slightly different here. A purchase through a gross salary scheme is a binding agreement. This means you do not have a right of withdrawal in the same way as when you buy products in stores.
If you remember the Danish Tax Agency’s conditions for a gross salary scheme (no. 2 bullet point above), thenthe reduction in the employee’s cash salary must be determined in advance and must not be adjusted once the scheme has started. If your employee regrets buying their office chair, they are committed to it for as long as the scheme is active.
If an employee leaves the company
BUT! Because there is always a “but”. If your employee leaves the company, they can choose either to buy the office chair out of the scheme or simply return it to the company.
What should you then do with a used office chair that your company cannot use? – you might be thinking. No worries, we actually have a solution for how your company can avoid being stuck with equipment that no one uses anymore.
Is a Gross Salary Scheme right for your company?
That is a question we unfortunately cannot answer for you, but hopefully this (sorry, slightly long) article has set some thoughts in motion.
Thoughts you might consider if you are unsure whether you should offer gross salary schemes in your company:
- What wishes and needs do your employees have for IT and work equipment? Are they tech-savvy? Do they have a home office?
- Would a gross salary scheme make their work easier/better?
- Do you do anything extra for your employees (that is not lunch programs and free fruit)?
There are many different ways to offer gross salary schemes, so it is definitely not a one-size-fits-all solution. You can create several different schemes for different departments and job functions. You also do not have to offer everyone a gross salary scheme, and you can even decide yourself when your employees can get one.
So it is extremely flexible for both company and employee needs. The only question is how it fits best with you?