Hire and pay employees in Denmark quickly and compliantly

Complying with labor and employment laws in Denmark

Danish labor and employment laws can be a complex compliance maze. The country’s regulations vary significantly from its European neighbors, especially when it comes to working hours and leave entitlements. 

You can simplify hiring and compliance by partnering with Rippling EOR and get expert HR guidance on Denmark’s employment laws. 

Employment contracts in Denmark

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of the employment relationship. According to an EU Directive, Danish employers must provide the key terms of employment within five days after the employee’s start date and a full employment contract within one month. The contract can be in English or in a language the employee understands. An offer letter alone doesn’t cement an employment relationship.

A Danish employment contract must contain at least the following information:

• Employee’s and employer’s name and address
• Workplace location and main office
• Job description, including the title and job category
• Employment start date
• Expected duration (if the contract isn’t permanent)
• Employee’s holiday entitlements 
• Terms of notice for employer and employee
• Salary details (including allowances, pension contributions, bonuses, etc.)
• Payroll frequency
• Standard working hours 
• Applicable collective bargaining agreements or other agreements

Labor unions in Denmark

Denmark has a high unionization rate, with nearly 70% of Danish employees belonging to a trade union, but union membership is not required by law. Additionally, employers can’t force employees to join a specific union, nor can they deter them from joining one. 

The largest union in Denmark is called "FH" (Fagbevægelsens Hovedorganisation). It represents public and private sector employees, including skilled, semi-skilled, and some salaried employees. There are also individual unions for different professions, like the IDA for professionals in STEM and Djøf for managers, employees, self-employed individuals, and students. However, most union participants are public sector employees (like teachers, nurses, and construction workers). 

Danish trade unions are typically responsible for negotiating collective agreements with employers’ organizations at the national level. These agreements determine pay and working conditions. At the company level, it’s common to see union representatives in workplaces consulting with management directly. 

Aside from trade unions, most public sector employees pay into an unemployment funds (A-kasse) which provides a legal advisory service. This service can review employment contracts, termination letters, and more to ensure employment conditions comply with Danish Labor Law.

Mitigating permanent establishment risk in Denmark

Permanent establishment (PE) is a concept in international tax law that refers to a fixed place of business through which a company conducts its business activities in a foreign country. It is a key factor in determining whether a company is subject to corporate tax in a foreign jurisdiction. In Denmark, a permanent establishment may be:

• A branch, office, factory, or workshop
• An agent’s office with authority to sign agreements on behalf of the business
• A development, building, or assembly project
• Activities involving planning, supervision, and consulting

The work that the business conducts must have some permanency—usually six months—but there’s no fixed minimum time. 

While there’s no single way to avoid PE risk, companies looking to expand globally can take certain precautions, including:

• Consulting with a legal professional. Obtaining advice from a legal or tax expert early on can help you understand Denmark’s PE framework and assess your company’s risk.
• Establishing a legal entity. If you plan to stay in the Danish market long-term, consider creating a separate legal entity to conduct operations under that entity. 
• Limiting duration and presence. Be strategic about how much time employees spend in the country and avoid having a fixed place of business, like an office or factory. 
• Regularly reviewing business practices and local laws. Ensure documents and practices are up-to-date and compliant with current Danish laws.
• Working with an EOR. Instead of establishing a legal entity, you can use an employer of record to help manage the complexities of international compliance. An EOR like Rippling can handle administrative functions, such as payroll, tax filing, benefits administration, and compliance with employment laws.

Protecting company IP in Denmark

Intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. Intellectual property is intangible, meaning it does not have a physical form but represents valuable assets that can be owned, licensed, or sold.

Denmark has robust protections when it comes to intellectual property rights. Companies can submit an application to the Danish Patent and Trademark Office (DKPTO) online to register different types of intellectual property. Applications must include your personal information, IP description, and the services it applies to, along with the appropriate application fee. The types of protections you can apply for include:

• Trademarks: Protect brand names, logos, slogans, and other identifiers that distinguish goods or services in the marketplace. Subject to renewal every 10 years.
• Designs: Protect the appearance and shape of a product. Subject to renewal every five years, up to two times. 
• Patents: Protect inventions and technological innovations. Valid for up to 20 years.
• Utility models: Protect the technical design of an invention in the pre-patent phase. Valid for up to 10 years.
• Copyrights: Protect literary and artistic works, such as books, newspapers, paintings, and photographs. Valid through the author’s lifetime plus 70 years.

Local laws in Denmark

Denmark has many unique regulations employers must comply with, which can get tricky if you’re hiring in multiple countries. Here are some of the most important laws to keep in mind when expanding your business to Denmark:

• There are no statutory rules regarding working hours. Generally, collective bargaining agreements or employment contracts mandate standard working hours. However, many sectors default to 37 hours weekly.
• Parental leave is flexible and transferable. Each parent is entitled to 24 weeks of maternity and paternity leave (48 weeks in total). Parents can transfer up to 13 weeks of leave from one to the other and even apply for additional parental leave.
• Denmark doesn’t have at-will employment. Employers may only terminate an employee with just cause and sufficient notice. Just cause can include financial reasons or employee misconduct.
• There is no statutory minimum wage. Collective agreements typically determine wages and salaries in Denmark. In some cases, employees and employers can reach individual agreements regarding pay. 

Worker classification and misclassification in Denmark:  Contractors vs. employees 

When hiring new talent in Denmark, you need to decide which type of working arrangement—independent contractor or full-time employee—is better suited for your business needs. Both come with their own set of implications, so it’s important to understand the differences. If you misclassify workers in Denmark, you could face penalties, back taxes, and serious legal action. 

Worker classification in Denmark: Key differences between contractors and employees

Unlike other countries, Denmark doesn’t have a specific law that outlines the differences between employees and contractors, so it’s largely based on case law interpretation. Danish courts typically analyze a combination of factors when assessing worker classification, meaning their determination is based on the overall working arrangement. They consider things like remuneration, relationship of authority, and integration into the company, to name a few. 

Consequences of misclassification in Denmark

Misclassifying workers in Denmark can result in serious consequences. Some of the potential risks include:

• Financial penalties: Employers can face fines for misclassifying employees as contractors, starting at DKK 10,000. In severe cases, the penalty may be as high as 20 weeks of an employee’s salary.
• Compensation for non-competes: Employees may also be entitled to compensation for non-compete agreements.
• Back payment for benefits: If the employer didn’t provide mandatory benefits throughout the working relationship, they may be responsible for compensating the wrongly classified worker.
• Tax repayment: Employers may also be liable for unpaid taxes and social security contributions, which may result in additional fees until paid.

Wages and payroll in Denmark

Collective bargaining agreements determine wages and working conditions in Denmark. While wages vary significantly depending on industry and occupation, they’re typically higher in Denmark than in most countries. Here’s what you need to know about wages and payroll in Denmark.

Minimum wage in Denmark

The average monthly wage in Denmark is 46,972 Danish krone (roughly EUR 6,200) while the average minimum wage is around DKK 15,000 (or EUR 6,200).  However, Denmark does not have a mandatory minimum wage at the national level. Instead, CBAs largely determine wages, so there’s quite a bit of variation between sectors and even within industries.

Payroll frequency in Denmark

The standard payroll cycle in Denmark is monthly. Most employees receive payments on the last working day of each month.

Run payroll compliantly in Denmark

Hiring and paying employees for the first time in Denmark can be tricky, especially when it comes to running payroll. But partnering with an EOR allows you to offload critical compliance work—like figuring out deductions, following wage laws, and accurately paying employees. Rippling EOR helps you hire and pay global employees faster than ever before.

Employer and employee taxes in Denmark

In Denmark, complying with payroll tax regulations is crucial, as the penalties for non-compliance can be steep. Employers are generally responsible for calculating and withholding contributions from employees’ paychecks, but understanding Danish tax codes can be challenging. Here are the most important things to know about employer and employee taxes in Denmark.

Employer taxes in Denmark

The mandatory employer payroll taxes in Denmark include:

Employee taxes in Denmark

Employee taxation in Denmark can be complicated for first-time employers in the country. Tax rates vary significantly depending on employees’ personal tax cards. These cards ensure employees pay the right tax amount based on their individual salary—and employees can make changes to them at any time. If an employee does not register for a tax card, they will automatically pay 55% of their salary. Each employee also has a yearly tax-free amount that appears on their tax cards. 

Here are the standard contributions that must be deducted from employees’ paychecks:

Employee benefits in Denmark

Offering competitive employee benefits in Denmark can help your company stand out. Understanding benefits requirements early on can also keep you from landing in hot water with Danish authorities down the line. Here’s an overview of the mandatory and optional benefits in Denmark.

Mandatory benefits in Denmark

Mandatory benefits are legally required, meaning employers have to offer them to their employees. Denmark doesn’t have many mandatory benefits, as trade unions or CBAs determine most benefits. Aside from paid leave, the only required benefits include:

• Pension (ATP): Employers and employees must contribute to Denmark’s mandatory pension fund, with the former paying two-thirds of the total contribution and the latter paying one-third.
• Workplace accident insurance: Employers must also have occupational injury insurance, ensuring that all employees (part-time and full-time) are covered in the event of a work-related accident.

Optional benefits in Denmark

Investing in optional and fringe benefits improves your chances of attracting top talent, but choosing which ones to offer can feel overwhelming. Here are the most common additional benefits in Denmark: 

• Private health insurance: While Denmark offers a universal healthcare system, many employers choose to offer additional private insurance for more holistic coverage. Managed care schemes are the most popular option.
• Private pension: Due to the small public pension, many employers also offer a private pension as a way to stand out. Both employees and employers contribute to the pension fund.  
• Disability insurance: This can supplement public disability benefits and offer additional income protection. Supplementary disability insurance is typically built into an employee’s pension plan.
• Life insurance: Employers can also set up life insurance as part of an employee’s pension plan. Life insurance typically has a minimum base level, but employees can select higher coverage (funded from their pension contribution). 
• Commuter allowance: Some employers offer a commuter allowance to offset commuting costs. Employees can also claim a transportation deduction if they travel more than 24 kilometers to and from work daily. 
• Internet/phone allowance: It’s common for employers to provide employees with a mobile phone and internet stipend. This allowance is considered taxable income for the employee, with a maximum contribution of DKK 258.33 per month.
• Home office allowance: Many companies offer a home office allowance of DKK 2,000 per month as a way to help employee’s with their rent, electricity, and home office space.
• Canteen: Larger employers in industrial facilities typically offer canteen arrangements on-site. Canteens provide food at a discounted rate to employees, and the employer’s contribution is tax-free as long as employees pay a minimum amount for the meals.

Working hours, overtime, and leave in Denmark

Understanding standard working hours, overtime regulations, and Danish leave laws is crucial, as these requirements vary significantly from country to country. CBAs determine most of Denmark’s hours and leave regulations. However, in the absence of such agreements, some standards apply across industries.

Standard working hours in Denmark

While there aren’t any statutory rules regarding working hours, most industries have a 37-hour workweek. Danish employees typically work Monday to Friday between 6 a.m. and 6 p.m. and enjoy an exceptional work-life balance, rarely working long hours.

Overtime laws in Denmark

Danish employees can work a maximum of 48 hours per week (including overtime). Depending on the CBA, overtime pay is generally 1.5x-2x the employee’s standard rate—and only mandatory if directly stated in the agreement. Employees may choose to receive time off in lieu of payment.

Rest period and break laws in Denmark

Danish employees are entitled to a meal period or a break during any workday lasting six or more hours. A standard lunch break is 30 minutes and is normally unpaid (unless otherwise specified in the employment contract). According to the EU Working Time Directive, employees must receive 11 consecutive hours of rest for every 24 hours, plus one full rest day each week.

Leave laws in Denmark

In Denmark, employees are entitled to the following types of leave: 

• Annual leave: Full-time employees are entitled to 25 days of paid vacation leave each year, accrued at a rate of 2.08 days per month. Part-time employees also receive vacation leave, accrued at the same rate. However, their leave varies depending on how they schedule their part-time working hours.
• Maternity leave: Expecting mothers can take up to four weeks of maternity leave before the birth of their child and 24 weeks after. Of the 24 weeks, 11 must be taken by the mother while the remaining 13 can be transferred to the other parent. Employees typically receive 50% of their salary during the four weeks before birth and the first 14 weeks after birth. The remaining leave is covered by social benefits.
• Paternity (parental) leave: The parental leave allowance is also 24 weeks. The employee must take the first 11 weeks before the child turns one. Similarly to maternity leave, the last 13 weeks are transferable. 
• Sick leave: Employees are entitled to unlimited paid sick leave, during which they receive their full salary from their employer—with the caveat that they have been employed for at least 30 days or worked 74 hours for that employer. If an employee is ill for 120 days or more within 12 months, the employer can terminate them.
• Public holidays: Denmark has 11 official public holidays. All employees must receive paid time off from their employers.
• Carer’s leave: Danish employees can take up to six months off to care for a dying or seriously ill family member. The local authority pays the carer’s allowance to the employee.
• Military leave: Men and women between the ages of 18 and 30 can be selected for military service. Whether they’re selected by the government or choose to serve voluntarily, military leave is job-protected—meaning these employees must be allowed to return to their employment positions.

Employee onboarding in Denmark

A thorough, organized onboarding process sets the stage for a successful employment relationship. Remember, a positive onboarding experience begins well before your new hire’s first day—so make sure to complete things like background checks and relevant paperwork in advance. A checklist can help you track every part of the employee onboarding process in Denmark.

How to onboard employees in Denmark: A simple checklist

Ensure you set your Danish employee up for success on their first day with our new hire onboarding process checklist.

Running background checks in Denmark

Are background checks legal in Denmark?

Hiring a new employee can be exciting, but make sure you don’t skip the background screening process. Background checks are legal and optional in Denmark as long as they comply with the General Data Protection Regulation (GDPR) and the Danish Data Protection Act. Employers typically verify employment history, educational history, and criminal records as part of the screening process but must receive written consent from the candidate before doing so.

What types of background checks are illegal in Denmark?

While most types of background checks are legal in Denmark, some are restricted by industry. For example, credit checks and medical checks are only allowed for relevant positions and with consent from candidates.

Any checks that don’t comply with data protection and privacy laws may be considered illegal, but courts will determine this on a case-by-case basis. 

Types of Danish background checks

Offer letters in Denmark

A job offer letter, or offer of employment, is a document that outlines key working conditions for employees. In Denmark, an offer letter contains information similar to that of an employment contract. However, an offer letter alone is not legally binding. Here’s a short list of information to include in a Danish offer of employment:

• Employer’s name, address, and CVR number
• Employee's name and address
• Workplace address
• Employment start date
• End date (if the employment is temporary)
• Job title
• Description of tasks and responsibilities
• Working hours
• Salary

• Holiday entitlements
• Termination conditions
• Relevant CBA agreements 

NDAs and confidentiality agreements in Denmark

In Denmark, the Danish Trade Secrets Act primarily governs non-disclosure agreements (NDAs) within employment relationships. This legislation mandates that employees maintain the confidentiality of their employer’s trade secrets during and after employment. While the Act provides a general framework for confidentiality, employers often implement specific NDAs to further safeguard sensitive information. Here are some key considerations for NDAs in Denmark: 

• Agreements in writing: It’s advisable for NDAs to be documented in writing to ensure clarity and enforceability.
• Scope of confidentiality: NDAs should clearly define what constitutes confidential information, ensuring that employees are fully aware of their obligations.
• Duration: The agreement should specify the time period during which confidentiality must be maintained, which can extend beyond the termination of employment.
• Legal compliance: NDAs must align with overarching Danish employment laws and regulations, ensuring they don’t infringe upon employees’ rights.

It’s important to note that while NDAs are enforceable in Denmark, they can’t impose unreasonable restrictions on employees. If clauses excessively limit an individual’s ability to work in their field post-employment, they may be deemed invalid. For comprehensive guidance on drafting NDAs that comply with Danish law, it’s best to consult with legal professionals experienced in Danish employment regulations.

Probationary period in Denmark

A probationary period is a time when employers assess and monitor new employees’ performance. Employers should state the length of the employee’s probation period in the employment contract. In Denmark, the maximum probation period is three months, during which employees and employers can end the contract with only 14 days’ notice.

Work permits in Denmark

You’ll need to ensure your candidate can work in Denmark before they start their new job. In Denmark, non-EU citizens must obtain a work and residence permit which combines the right to legally live and work in the country.

To be eligible for a work permit, foreign nationals typically need a job offer from a Danish employer. The type of permit they need will depend on their specific circumstances (i.e., type of job offer, salary, job title, and industry).

Who needs a work visa in Denmark?

In Denmark, foreign nationals without permanent residency must apply for a work and residence permit. This includes anyone who is not a citizen of an EU/EEA state or a Nordic country. EU/EEA, Nordic, and Swiss citizens don’t need to apply for a work permit and can work upon entering Denmark. 

How long does it take to get a work visa in Denmark?

Typically, work permit processing in Denmark takes 30 days. If a foreign national applies for a work permit through the fast track scheme, the processing time may be faster. To limit potential delays or setbacks, be diligent during the application process. Sometimes, the Danish Agency for International Recruitment and Integration (SIRI) will require additional information before making their final decision.

Types of work visas in Denmark

Denmark offers several types of work permits for foreign nationals with differing requirements, including:

• Fast track scheme: For individuals with a job offer from a SIRI-certified company. This scheme offers faster recruitment, a flexible permit, and a quick start. Employers are responsible for sponsorship and the application process for this scheme. Employees must meet the requirements for one of the following tracks to qualify: the pay limit (or supplementary pay limit) track, the short-term track, the researcher track, or the educational track. 
• Pay limit schemes: For foreign nationals with a job offer that meets minimum salary requirements. The minimum salary is DKK 487,000 for the pay limit scheme and DKK 393,000 for the supplementary pay limit scheme. Minimum salary requirements are adjusted annually on January 1.
• Positive lists: For individuals with a job offer that falls under one of the lists of professions currently experiencing a shortage of highly educated or skilled labor. Those applying for the positive list for higher education must be able to prove their educational qualifications. Both the positive list for higher education and the positive list for skilled labor receive biannual updates, one on January 1 and another on July 1.  
• Trainee: For workers who have an offer of employment with a Danish company for a short period of time for training or education purposes. To receive a resident permit as a trainee, there needs to be a documented partnership between the company abroad and the applicant’s Danish employer.
• Researcher: For researchers with a job offer at a research institute or company in Denmark. If the company or university offering employment is certified for the fast-track scheme, they can apply through that track instead for a quicker job start. 
• Special individual qualifications: For performers, artists (including singers and musicians), professional athletes or coaches, and specialized chefs. There must be specific reasons why that individual is most suitable for the job, and they’ll need to provide appropriate documentation proving their qualifications.

Termination and redundancy in Denmark

When making your first hire in Denmark, termination policies might be far from your mind. But if you don’t know the basics about offboarding employees in Denmark, you could be setting yourself up for trouble when it’s time to part ways with an employee down the road.

A Danish employer must always have just cause to terminate an employee and is generally subject to notice period requirements (which vary by tenure). Notice period requirements also apply in cases where an employee terminates their employment. 

If an employer wants to dismiss employees due to redundancy, they must negotiate with the employees or their representatives and inform the appropriate Regional Labour Market Council.

Does at-will employment exist in Denmark?

At-will employment is a legal doctrine in which either the employer or the employee can terminate the employment relationship at any time, for any reason, and without prior notice, as long as the reason is not illegal (such as discrimination). 

In Denmark, at-will employment doesn’t exist, meaning employers must always have a justifiable reason to terminate an employee. These reasons include company restructuring, work shortages, and cooperation or performance issues. Collective bargaining agreements typically define dismissal procedures between unions and employers.

Notice periods in Denmark

A notice period is the amount of time an employee or employer is required to give notice before ending an employment relationship. In Denmark, employers must provide employees with notice as defined in the Salaried Employees Act:

Severance pay in Denmark

Severance pay is compensation provided to employees when they are laid off, terminated, or leave a company under certain conditions. Denmark has no mandatory severance pay, meaning employers must outline severance requirements in the employee’s collective bargaining agreement or employment contract. Employees may receive severance pay if they have worked for the same employer for 12 or more years—one month’s salary for 12-17 years of service and three months’ salary for more than 17 years.

How to terminate employees compliantly in Denmark

Keeping track of termination requirements gets complicated if you employ a global workforce. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries. An alternative is to hire Danish employees through an EOR, which can monitor termination requirements for you—ensuring you compliantly onboard and offboard employees every time.

FAQs about hiring in Denmark

Can I hire in Denmark without my own entity?

Yes. If employers don’t want to establish their own entity in Denmark, they can choose to hire through an employer of record (EOR). An EOR service acts as the legal employer on a company’s behalf, helping them manage payroll, benefits administration, and compliance work. With an EOR, hiring employees is faster since you don’t have to set up an entity, and the cost of hiring can be lower—especially if you plan to expand in multiple countries.

An EOR like Rippling can help you quickly tap into Denmark’s talent pool and grow your global team while minimizing compliance risks and reducing your administrative burden.

What is the difference between an independent contractor and an employee in Denmark?

In Denmark, an independent contractor is self-employed, meaning they set their own work schedule, provide benefits themselves, use their own equipment, and often work with multiple clients. An employee, on the other hand, operates under a formal employment contract, receives benefits from the company, and works solely for their employer.

Keep in mind that Danish courts evaluate misclassification claims on a case-by-case basis. Even if a contract labels a worker as an independent contractor, the courts will review the actual working relationship before making a determination. They’ll consider factors like dependence, autonomy, and work schedule.

What is the annual leave entitlement in Denmark?

Danish employees are entitled to 25 days of paid annual leave each year. Paid leave accrues at a rate of 2.08 days per month for full-time employees. The rate for part-time employees is the same, but their leave varies depending on how they schedule their part-time working hours.

What is the process for obtaining a work permit for non-EU citizens in Denmark?

The work permit application process is fairly straightforward in Denmark. Non-EU citizens must secure a job offer from a Danish employer before applying for a work permit. The application process may vary depending on the permit type but generally involves the following steps:

1. Choose a relevant work permit scheme.
2. Create a case order ID (this is where you’ll provide personal information).
3. Pay the work permit fee.
4. Submit the required documents (including passport, passport-size photos, proof of health insurance, proof of fee payment, job offer letter, power of attorney form, diplomas or certifications, etc.)
5. Submit the application.
6. Submit your biometric data (within 14 days of applying).

Foreign nationals living outside Denmark can complete the application process and submit all relevant documentation online through the Danish Agency for International Recruitment and Integration or directly at their local Danish embassy or consulate. 

How much does it cost to hire an employee in Denmark?

In addition to paying an employee’s salary, Danish employers must also contribute an additional 7.1% for mandatory contributions, such as pension and occupational injury insurance. Here’s a breakdown of the employer costs:

What is always required when an employer terminates an employee in Denmark?

In Denmark, an employer must always have just cause to legally terminate an employment relationship. Additionally, employers and employees are both subject to notice period requirements, which vary based on the employee’s tenure. The notice periods are as follows:

Employers seeking to dismiss employees due to redundancy must negotiate with the employees themselves or their representatives and inform the relevant Regional Labour Market Council.

What are the legally required employee benefits in Denmark?

Compared to other European countries, Denmark does not mandate many benefits at the national level. Trade unions or collective bargaining agreements decide most benefits requirements. Outside of offering paid annual leave, employers must provide a pension scheme (specifically the ATP) and occupational injury insurance for employees.

Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.