Employer was entitled to maintain Health Insurance despite amended Tax Rules
23 October 2013
In its pronouncement of 17 September 2013, an industrial arbitration tribunal found that an employer was entitled to maintain a mandatory health insurance in spite of amended tax rules.
The case involved whether employees were to be given the option to opt out of a health insurance taken out and paid by the employer.
In 2008, the employer had unilaterally implemented the health insurance without any objections at this point - or in the subsequent years. However, as of 1 January 2012, the rules on taxation of health insurance were amended to the effect that the employees, going forward, were liable to pay tax on the premium payment, which for the income year 2013 resulted in taxation of an annual amount of DKK 1,445.70 for the individual employee.
From the side of the employees it was, inter alia, argued that the payment of the insurance premium constituted a pay supplement, and that the amended rules on taxation resulted in a pay cut being imposed on the employees and that such pay cut would have to be notified to the employees. Moreover, they argued that the company had not satisfied the burden of proof that there were operational reasons for continuing the health insurance for which reason it was not reasonable to maintain it.
The umpire found that both the employer and the employees had adapted to the fact that the company had a health insurance which comprised all employees. Moreover, the umpire stated that amendments in the taxation of salary, benefits etc. do generally not entitle the employees to changes in the existing salary terms.
Against this background, and as a proportionality assessment of the amended terms could not lead to any other result, the umpire found that the employer was entitled to maintain the mandatory health insurance.
The pronouncement shows that employers are generally entitled to maintain existing health insurances in spite of the fact that the employees are thereby imposed an extra burden of taxation as the risk pertaining to amendments to taxation of salary and benefits does not lie with the employer. As such, the award helps clarify the legal position in this area after the amendment of the tax rules.
In 2008, the employer had unilaterally implemented the health insurance without any objections at this point - or in the subsequent years. However, as of 1 January 2012, the rules on taxation of health insurance were amended to the effect that the employees, going forward, were liable to pay tax on the premium payment, which for the income year 2013 resulted in taxation of an annual amount of DKK 1,445.70 for the individual employee.
From the side of the employees it was, inter alia, argued that the payment of the insurance premium constituted a pay supplement, and that the amended rules on taxation resulted in a pay cut being imposed on the employees and that such pay cut would have to be notified to the employees. Moreover, they argued that the company had not satisfied the burden of proof that there were operational reasons for continuing the health insurance for which reason it was not reasonable to maintain it.
The umpire found that both the employer and the employees had adapted to the fact that the company had a health insurance which comprised all employees. Moreover, the umpire stated that amendments in the taxation of salary, benefits etc. do generally not entitle the employees to changes in the existing salary terms.
Against this background, and as a proportionality assessment of the amended terms could not lead to any other result, the umpire found that the employer was entitled to maintain the mandatory health insurance.
The pronouncement shows that employers are generally entitled to maintain existing health insurances in spite of the fact that the employees are thereby imposed an extra burden of taxation as the risk pertaining to amendments to taxation of salary and benefits does not lie with the employer. As such, the award helps clarify the legal position in this area after the amendment of the tax rules.
