Employer of Record (EOR) Denmark

EOR Solutions in Denmark

Employees vs Independent Contractor Compliance

This table succinctly captures the key distinctions between employees and independent contractors in Denmark, considering legal frameworks, hiring practices, tax considerations, remuneration, workers’ rights, and payment schedules.

Employment Contracts in Denmark

In Denmark, employment contracts are regulated by national acts, collective agreements, EU legislation, and local labor courts. The scope covers open-ended and fixed-term agreements, excluding those under the Seamen’s Act. Employers must furnish essential employment details within a month, encompassing names, job descriptions, start dates, and salaries. For posted workers, additional information, such as duration abroad and return conditions, is mandatory. Employers must promptly communicate any changes to employment terms, ensuring compliance with the Danish Appeals Authority’s Employment Committee. Non-compliance may result in compensation for employees, capped at 20 weeks’ salary for severe cases. The Act, effective since July 1, 1993, applies to agreements made on or after this date, with transitional provisions for existing agreements. Amendments have been introduced on specific dates, impacting sections as outlined in respective acts.

Working Hours

Denmark lacks statutory rules for standard working hours, typically defined by collective agreements or employment contracts, often set at 37 hours weekly. Usual working hours span Monday to Friday, 8 or 9 AM to 4 or 5 PM, with lunch breaks generally not factored into weekly hours.

The maximum average working week over four months stands at 48 hours, with an opt-out available if compliant with the Working Time Directive through collective agreements.

Overtime pay/ compensation follows collective bargaining agreements, commonly at 50% for the initial 3 hours and 100% thereafter. Employees may opt for time off instead of payment. Public holiday work warrants a 100% pay bonus based on the average salary.

Probation Period

Denmark does not have a prescribed probation period. Employers commonly institute a three-month probationary period, subject to a 14-day notice period.

Social Security in Denmark

Social Security Contributions

The Danish social security system, primarily financed through ordinary tax revenue, involves minimal social security contributions for employees and employers. Here are key details about social security, tax deductibility, contributions, rates, and other relevant aspects in Denmark:

Denmark Employee Hiring Cost

In Denmark, hiring an employee involves various costs beyond the gross annual salary. For instance, if the gross annual salary is DKK 9,999.96, the total annual employer costs amount to DKK 8,050.44. This includes contributions to social security, labor market supplementary pension (ATP), and other public social security schemes. Therefore, the comprehensive annual cost incurred by the employer, encompassing both the gross salary and associated contributions, is DKK 18,050.40. It’s crucial for businesses to consider these additional expenses to accurately assess the overall financial commitment associated with hiring employees in Denmark.

Employee Benefits

Annual Leave, Maternity Leave, Parental Leave, Sick Leave, Bereavement Leave, and Sabbatical Leave in Denmark are governed by comprehensive leave laws and regulations.

Holidays:  Denmark observes various holidays, including the following:

Paid Time Off (PTO):

• Vacation/Annual Paid Leave Employees are entitled to up to 10 weeks of paid annual leave during the transition year, with a maximum of five weeks in the transition period.
• Use-it-or-lose-it policy Parties can agree on alternative holiday arrangements, and excess leave can be carried over to the following year.
• PTO Payout at Termination Employers must account for and pay any accrued and outstanding holiday pay when the employment relationship ceases.

Maternity, Paternity, and Adoptive Leave:

• Maternity Leave Pregnant employees can take 4 weeks before the due date, followed by 14 weeks of mandatory maternity leave. An additional 32 weeks of parental leave can be shared and extended up to a maximum of 46 weeks.
• Paternity Leave Fathers are entitled to 2 consecutive weeks of paid paternity leave and up to 32 weeks of shared parental leave, extendable to 46 weeks.
• Adoptive Leave Adoptive parents are entitled to 4-8 weeks of leave for adopting a child from abroad and 1-2 weeks for adopting a child in Denmark.

Sick Leave:

• Employers pay for the first 30 days of sick leave, followed by up to 22 weeks covered by social benefits. Eligibility criteria include past employment hours, vocational training, and apprentice status.

Dependent Care Leave:

• Employees can take up to 5 days of paid leave per child within 12 consecutive months when hospitalized with their children under 14 years.

Bereavement Leave:

• Employees who lose a child before the age of 18 are entitled to 26 weeks of unpaid leave.

13th Salary

While there is no legal obligation in Denmark to provide a 13th-month salary payment, employers commonly extend bonuses to their employees.

Personal Income Tax

Individuals in Denmark are subject to national income tax, municipal tax, labour market tax, and church tax. Under the ordinary tax scheme, various types of income are considered, including personal income, capital income, taxable income, share income, and property value. These income types are taxed at different rates, affecting the value of deductions based on the specific income category.

Note: Tax bands and local taxes may be adjusted annually. The marginal tax rate cannot exceed 52.07% (2023) when considering state and local taxes. However, certain taxes such as labour market tax, share tax, property value tax, and church tax are not included in this cap. Net capital income is taxed at a maximum rate of 42% in 2023, with limited deductions for negative net capital income and other allowances.

Work Permit in Denmark

Denmark offers various work permits tailored to the location of employees and their intended activities in the country. Citizens from Nordic countries, such as Finland, Iceland, Norway, and Sweden, enjoy streamlined access without the need for specific work or residence permits. Likewise, family members from these Nordic nations can easily join individuals working in Denmark.

For citizens of the European Union (EU) and the European Economic Area (EEA), no visa is required for living, working, or studying in Denmark. However, adherence to the immigration rules set by the Danish Immigration Service and the Danish Agency for International Recruitment and Integration is essential. Other non-Nordic citizens must undergo a visa application process, enabling a 90-day stay. For those intending to stay longer, obtaining a residence and work permit becomes imperative.

Among the various work visas available, the Fast-Track Scheme, Pay Limit Scheme, and Positive List stand out as the most common. These encompass diverse categories such as research and pay limit visas.

Requirements for Denmark Work Visas

EU nationals seeking a Denmark working visa need specific documents, including a valid passport or national ID, a passport-size photo, a completed application, and documentation justifying residence as a worker.

Non-EU citizens must meet specific criteria and submit essential documents. This includes proof of visa fee payment, a passport copy, a power of attorney form, and either an employment contract or an official job offer. Certain visas may necessitate evidence of educational qualifications, Danish authorization for regulated professions, and other stipulated requirements.

Applying for a work visa in Denmark is a relatively quick and straightforward process compared to some other countries. However, due to the extensive list of requirements, applicants should be prepared for potential delays. Employers need to be well-versed in the application steps to ensure a smooth process.