Hiring Employees Guide in Denmark
November 27, 2018
Hire in Denmark
Denmark PEO &
Employer of Record
Hire & manage teams remotely in Denmark without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
Business Language
Danish, English
Salary Currency
Danish Krone (DKK)
Payroll tax
12.63%
Payroll Cycle
Monthly
Time zone
UTC +2
Capital city
Copenhagen
Hire Employees in Denmark
NNRoad provides employer of record (EOR) & professional employment organization (PEO) services to ensure that your business in Denmark complies with local labor laws and regulations. We process monthly payroll and act as the Employer of Record, taking on all local employer liabilities.
The NNRoad Advantage ☺
Pay as you go
No set-up or overhead costs to global expansion.
Global account manager
One point of contact for all of our 50+ serviced countries and regions.
Compliance
Ensured compliant contracts and operations.
Fast Onboarding
Start working with your remote employees/contractors within a week.
Foreigner Visas
NNRoad assists with overseas foreign hires visa needs.
Platform
Access your payroll reports and employee pay stubs on our portal.
Employer of Record in Denmark
Employer of Record (EOR) services are for companies who do not have a legal entity in Denmark, but who want to hire localy. Employment and full liability are outsourced to NNRoad.
01.
Candidate Selection
You interviews & select the candidates you want to hire in Denmark.
02.
Employee Onboarding
We sign a local labor contract with your employees based in Denmark.
03.
Compliance & Payroll
We manage monthly payroll, mandatory benefits & all HR compliance in Denmark.
04.
Payroll Reporting
See all payroll reports on our platform & focus on your business in Denmark.
Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation.
Hiring and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire).
On-boarding and off-boarding employees following labor law practice.
Complete payroll solution and benefit administration
Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law.
Mandatory insurance compliance (i.e. pension, labor and health insurance) according to the local labor laws.
Payment management (Invoicing customers/clients and vendor payments).
Work VISA application assistance, if needed.
Local individual income tax reporting.
Payroll & PEO in Denmark
Professional Employment Organization (PEO) services are for companies who have a legal entity in Denmark, and want to outsource their payroll. Employment liabilities are shared between your organization and NNRoad.
01.
Compliance & Payroll
We manage monthly payroll, mandatory benefits & all HR compliance in Denmark.
02.
Payroll Reporting
See all payroll reports on our platform & focus on your business in Denmark.
Registering the necessary company and personnel information for payroll calculation in the payroll software and system
Monthly Payroll Processing
Year-End Adjustment and Annual Declaration
Taxes & Payroll in Denmark
Employee Income Taxes:
Individual income tax rates in Denmark are based on progressive tax brackets.
An individual may be taxed in Denmark as if he or she has a full tax liability to Denmark, a limited tax liability to Denmark, or according to specific expatriate rules or work force hiring requirements. Employees in Denmark have their income taxes withheld directly from their salaries through a payroll withholding system. Employers are responsible for deducting the appropriate amount of tax from each employee’s paycheck and remitting it to the tax authorities on their behalf.
Tax Brackets
For the portion of income up to DKK 57,200 (approximately €7,700), the tax rate was 8%.
For the portion of income above DKK 57,200 and up to DKK 540,800 (approximately €72,800), the tax rate was 12%.
For the portion of income above DKK 540,800 and up to DKK 774,900 (approximately €104,300), the tax rate was 22%.
For the portion of income above DKK 774,900 and up to DKK 1,363,000 (approximately €183,700), the tax rate was 32%.
For the portion of income above DKK 1,363,000, the tax rate was 52.1%.
For the portion of income above DKK 57,200 and up to DKK 540,800 (approximately €72,800), the tax rate was 12%.
For the portion of income above DKK 540,800 and up to DKK 774,900 (approximately €104,300), the tax rate was 22%.
For the portion of income above DKK 774,900 and up to DKK 1,363,000 (approximately €183,700), the tax rate was 32%.
For the portion of income above DKK 1,363,000, the tax rate was 52.1%.
Sample Calculation
For this example, let’s assume an annual income of DKK 800,000.
First, we calculate the tax for each income bracket:
For the first bracket (8% tax rate):
Tax = DKK 57,200 * 8% = DKK 4,576
For the second bracket (12% tax rate):
Tax = (DKK 540,800 – DKK 57,200) * 12% = DKK 58,176
For the third bracket (22% tax rate):
Tax = (DKK 774,900 – DKK 540,800) * 22% = DKK 50,826
For the fourth bracket (32% tax rate):
Tax = (DKK 800,000 – DKK 774,900) * 32% = DKK 8,064
No tax is calculated for the fifth bracket, as the income is not above DKK 1,363,000.
Next, we sum up the taxes calculated for each bracket:
Total Tax = DKK 4,576 + DKK 58,176 + DKK 50,826 + DKK 8,064 = DKK 121,642
Based on this calculation, an individual with an annual income of DKK 800,000 would pay approximately DKK 121,642 in income tax in Denmark.
First, we calculate the tax for each income bracket:
For the first bracket (8% tax rate):
Tax = DKK 57,200 * 8% = DKK 4,576
For the second bracket (12% tax rate):
Tax = (DKK 540,800 – DKK 57,200) * 12% = DKK 58,176
For the third bracket (22% tax rate):
Tax = (DKK 774,900 – DKK 540,800) * 22% = DKK 50,826
For the fourth bracket (32% tax rate):
Tax = (DKK 800,000 – DKK 774,900) * 32% = DKK 8,064
No tax is calculated for the fifth bracket, as the income is not above DKK 1,363,000.
Next, we sum up the taxes calculated for each bracket:
Total Tax = DKK 4,576 + DKK 58,176 + DKK 50,826 + DKK 8,064 = DKK 121,642
Based on this calculation, an individual with an annual income of DKK 800,000 would pay approximately DKK 121,642 in income tax in Denmark.
Employer Costs in Denmark
Employer Contribution
Employer Contributions:
| ATP (Pension) | DKK 2,272 per year |
| AUB | DKK 2,791 per year |
| AES | DKK 215-5.157 per year, depending on the type of work and risk to the employee |
| FIB (Financing of ATP contribution for those without a job due to sickness, maternity leave, or unemployment) | DKK 592 per year |
| Maternity leave fund | DKK 1,150 per year |
| AFU | DKK 48 per year |
| Occupational injury insurance | Costs vary between DKK 1,176 and DKK 24,441 depending on the field of work that the insured employee is employed within, the number of employees that the employer intends to insure, and the specific insurance company. |
Employee Contribution
Employee Contributions:
| ATP (Pension) | DKK 1,135.80 per year |
| Labor market contributions | 8% of the employee’s salary |
Benefits & Insurance in Denmark
Pension Fund
The pension fund system in Denmark is known for its comprehensive and well-developed structure, providing financial security and retirement benefits to the country’s workforce. The Danish pension system is based on a combination of public and private schemes, which work together to ensure a comfortable retirement for individuals.
State Pension: The state pension, also known as Folkepension, forms the foundation of the Danish pension system. It is a universal, publicly funded scheme available to all residents of Denmark, provided they meet certain criteria such as reaching the state retirement age and meeting residency requirements. The state pension is financed through taxes and is intended to provide a basic level of income in retirement.
Occupational Pension Schemes: In addition to the state pension, Denmark has a strong tradition of occupational pension schemes. These schemes are typically employer-sponsored and are negotiated through collective agreements between employers and trade unions. The contributions to these pension schemes are made jointly by the employer and the employee, and the funds are managed by pension providers. Occupational pension schemes in Denmark are characterized by high coverage rates, with a significant majority of the workforce participating in such schemes.
ATP: The Arbejdsmarkedets Tillægspension (ATP) is a supplementary pension scheme in Denmark. It is a mandatory, defined-benefit scheme that covers all employees, including those not covered by occupational pension schemes. Contributions to ATP are made by both employers and employees and are calculated based on a percentage of the employee’s salary. ATP provides a lifelong pension and various benefits such as disability and survivor pensions.
Private Pension Funds: Denmark also has a vibrant market for private pension funds, which individuals can choose to complement their state and occupational pensions. These funds are typically managed by financial institutions and offer a range of investment options to help individuals grow their pension savings. Private pension funds in Denmark are subject to strict regulations to protect the interests of pension holders.
Healthcare Insurance
Working Hours in Denmark
Working Hours Per Week
Working hours in Denmark are generally agreed upon in advance, and for the vast majority of areas, typical working hours are set at 37 hours per week. As an employee your working time must be more than eight hours per week to be a part of the Employers’ and Salaried Employees’ Act (in Danish: Funktionærloven). Working hours are primarily between Monday to Friday in the time frame between 6:00 am to 6:00 pm.
Overtime
Overtime is common in some jobs, and it can result in compensatory leave, which can be used to complement the 5-week yearly leave, or it can be paid as part of one’s salary. It’s critical that the contracts spell out clearly if overtime labor will be compensated or paid out as salary, as well as how overtime will be handled.
Termination Laws in Denmark
An employer must always have a serious reason for firing an employee; such as unfitness, cooperative problems or a condition in the organization which warrants dismissal (for instance work shortage, restructuring or cost-savings).
If an employer is unsatisfied with an employee’s efforts, it is customary for the employer to issue one or more warnings so that the employee can fix the condition with which the employer is unhappy.
The employment contract must specify the notice time that applies to both the employee and the employer. If the job is covered by a collective bargaining agreement, the termination notice for both parties usually follows the terms of the agreement.
Severance
Although there is no comprehensive statutory rule on severance compensation, salaried employees who have been continuously employed for 12 to 17 years are entitled to a severance pay of one to three months’ salary if they are fired.
Employment Contract in Denmark
Employment Contract
Employers must provide employees with a formal employment contract within one month of the start of employment, if the employment is for more than one month and the employee’s weekly working hours are at least eight hours on average, according to the Employment Contract Act.
As a minimum, the contract must include details on the following:
Name and address of the employer and the employee;
The most frequent type of employment is that of a full-time employee, which typically entails a 37-hour work week and five weeks of yearly leave. An employee can also be hired on a part-time basis, which means they will work fewer hours per week than a full-time employee in a similar capacity.
In Denmark, there are various types of temporary employment opportunities, including temporary labor and project work, among others. The only difference between this and regular employment is that the individual is only hired for a specific amount of time, which is defined in advance and contained in their contract.
Probation Period
Probationary periods of up to three months are permitted for salaried staff. The employment can be terminated with 14 days’ notice by the employer and without notice by the employee during the probationary period, if the notice period expires during the probationary period, which must be clearly agreed upon.
Types of Leaves in Denmark
Annual Leave
Sick Leave
During sick leave, salaried employees are entitled to their full compensation, including bonuses. Employees are entitled to 30 days of paid sick leave per year. Under an individual employment agreement or the equivalent collective agreement, an employee who is not covered by the Salaried Employees Act may be entitled to compensation while on sick leave. According to the Danish Act on Sickness Benefits, an employee who has no statutory or contractual entitlement to pay during sick leave may be eligible to sickness benefits.
The first 30 days of sickness are paid by the employer if the employee has been employed for eight weeks and worked at least 74 hours. After the employer period, if the relevant conditions are met, the municipality will reimburse or cover the sickness benefit, including that the employee has been employed and worked for at least 240 hours in the previous six calendar months, and that the employee has worked for at least 40 hours in at least five of those months.
The sick pay is determined by the employee’s hourly wage and weekly working hours. Sickness benefits are currently paid at a rate of DKK4,460 per week, or DKK120.54 per hour.
Maternity Leave
From four weeks before expected labor to 14 weeks after childbirth, female paid employees are entitled to 50% of their wages during maternity leave. Employees may be entitled to full pay during some of their maternity leave, depending on specific employment agreements or collective bargaining agreements. Employers who pay maternity leave salaries may be eligible for reimbursement through the Danish government’s Udbetaling Danmark. Employees must have been employed for at least 13 weeks and 120 hours to be eligible for maternity benefits.
Paternity Leave
Biological fathers and employees (male or female) who are legally, but not biologically, the child’s parents are entitled to two weeks of paid paternity leave within 14 weeks of the birth of their child.
Public Holidays in Denmark
Public Holidays
Resources