Payroll in Denmark

Mercans stands out as a premier provider of exceptional payroll services in Denmark. Our unwavering commitment to excellence is evident in our tailored solutions that leverage cutting-edge technology to meet the diverse requirements of employers, regardless of their size or industry. With extensive experience in the payroll sector, Mercans ensures precise and compliant payroll outsourcing in Denmark, establishing us as the preferred payroll provider in Denmark for businesses handling payroll transactions, whether for a single employee or an entire workforce. Count on Mercans for accurate and timely payments, as well as the convenience of multi-currency transactions. Serving as your local payroll partner in Denmark, we feature in-country payroll specialists with in-depth knowledge of local regulations, providing comprehensive support for a seamless payroll experience designed around your business’s specific needs.

Payroll Services in Denmark

Embark on a seamless payroll journey with Mercans in Denmark. Our extensive range of services ensures efficient payroll processing and compliance with Danish regulations. The scope of our services includes, but is not limited to:

• Registration of New Hires with Danish Authorities: Ensure compliance by registering new hires with Danish Social Security and Tax Authorities (SKAT and VIRK), laying the foundation for accurate payroll processing.
• Withholding Social Security and Taxes: Manage the withholding of social security and taxes, ensuring precise deductions and facilitating timely payments to the authorities.
  • Reporting on E-Payroll (LetLøn): Utilize the E-payroll system (LetLøn) for streamlined reporting, enhancing transparency and compliance in payroll processes.
  • Reporting Pay in E-Income: When paying employees, reporting is mandatory. Reports go to the E-Income register, holding info on income, including salaries, education grants, and pension benefits, for all Danes.
  • Paying A-tax and Labor Market Contributions (AM-Bidrag): After reporting into the E-income system, pay A-tax and labor market contributions through E-tax for businesses, ensuring compliance with deductions.
• Generate and Issue Payslips: Provide detailed monthly payslips to employees, incorporating essential information about salaries, deductions, and entitlements, fostering transparency and compliance.
• Transport Allowance Compliance: Address tax deductibility for transport allowance, considering various factors and ensuring compliance with regulations.
• Employee Benefits Administration: Administer employee benefits, offering an overview of tax implications for benefits like company cars, free phone, computer, internet, free food, and accommodation.
• Expat Tax Compliance: Ensure expat tax compliance, navigating regulations to provide a seamless experience for expatriate employees.
• Employee Master Data Maintenance: Keep employee master data updated, contributing to accurate payroll processing and compliance with regulatory requirements.
• Payroll Processing: Manage end-to-end payroll processing, covering deductions, pay transactions, time tracking, absence management, and holiday data.
• Applications for Reimbursement: Streamline reimbursement processes through effective applications, ensuring accurate and timely reimbursements for eligible expenses.
• Routines on Termination of Employment: Implement structured routines for employment termination, ensuring compliance and a smooth transition for departing employees.
• Year-End Routines: Execute comprehensive year-end routines, facilitating accurate reporting and compliance with annual requirements.
• Generate Monthly, Quarterly, and Annual Payroll Reports: Generate diverse reports regularly, providing stakeholders with insightful data for decision-making and compliance purposes.

Minimum Wages 

Denmark does not establish a minimum wage for areas lacking a collective bargaining agreement. Public sector positions often adhere to collective bargaining agreements specifying the minimum wage, averaging DKK 110 per hour. While these agreements extend to certain private sectors like construction and hospitality, they don’t encompass the majority of salaried employees. Payment frequency is typically monthly, with payday varying between the last day of the month and the 15th of the following month.

Payroll Cycle

The payroll cycle in Denmark is typically monthly, with payday occurring between the last day of the month and the 15th of the following month.

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.

Company Setup in Denmark

To initiate business operations in Denmark, all new entities are required to register with the Danish Commerce and Companies Agency, the overseeing body for company registrations. For Public Limited Companies (A/S) or Aktieselskab and Private Limited Companies (ApS) or Anpartsselskab, a registration fee of 670 DKK is applicable.

Step 1: Determine Your Legal Entity Type:

Choose the most suitable legal structure for your goals and activities in Denmark, selecting from options such as:

• Public limited company
• Private limited company
• Branch
• Representative office

Step 2: Official Company Registration:

All Danish companies must obtain a CVR number (Central Company Register Number) through the Danish Business Authority’s online registration system. This number is crucial for interactions with public authorities. Official registration should occur at least eight days before commencing operations. To register, a “NemID” (individual’s digital signature) is required, obtained with a residence and work permit in Denmark.

Step 3: Registration with Danish Tax Authorities:

Upon registration, the Danish Business Authority transmits relevant information to SKAT (Danish Customs and Tax Administration), responsible for tax and VAT collections. Separate registrations are necessary for VAT, payroll tax, duties, import/export, and A-tax (for employees).

Step 4: Considerations for Ongoing Business in Denmark:

Choose a practical financial year start date, often aligning with the parent organization. VAT filing frequency depends on the company size and requirements (monthly, quarterly, or semi-annually). The Danish company is a separate legal entity subject to a 22% corporate tax rate for 2022.

An audit is unnecessary if, for two successive financial years, the company stays below specified limits:

• Balance sheet amount less than DKK 4,000,000.00
• Net turnover less than DKK 8,000,000.00
• Average full-time employees fewer than 12 during the financial year.

Payroll Process in Denmark

The payroll process in Denmark can be broken down into three main stages:

Pre-payroll:

• Gathering employee data: This includes basic information like name, address, social security number, and bank account details, as well as employment information like salary, tax card details, and benefits enrolled in.
• Setting up payroll calendar: This determines the pay periods (typically monthly) and pay dates.
• Recording employee time and attendance: This can be done manually, through timekeeping software, or through project management systems.
• Calculating gross pay: This involves multiplying the employee’s hourly or monthly rate by the hours worked or salary amount.
• Applying deductions and taxes: This includes subtracting income tax, AM tax, and pension contributions according to Danish regulations and the employee’s individual tax card.
• Calculating net pay: This is the gross pay minus all deductions and taxes.
• Preparing payslips: Payslips detail gross pay, net pay, deductions, and any other relevant information for employees.

Payroll:

• Processing payroll data: This can involve manual calculations or using payroll software.
• Generating payments: This includes transferring or depositing employees’ net pay to their bank accounts on the designated pay date.
• Reporting and paying taxes: Payroll providers usually handle this through electronic submissions to SKAT, including income tax, AM tax, and ATP contributions.

Post-payroll:

• Reconciling accounts: This ensures all payments and deductions match up correctly.
• Storing payroll records: Records must be kept for at least five years according to Danish regulations.
• Preparing year-end reports: This includes reports for employees, such as annual tax statements, and reports for SKAT, such as annual payroll summaries.

Payroll Compliance in Denmark

Navigating the intricacies of statutory filings and contributions is essential for employers in Denmark. This comprehensive guide outlines key processes, ensuring compliance with tax regulations and reporting requirements. From tax card subscriptions to salary statistics, each aspect plays a crucial role in maintaining a seamless and compliant payroll system.

Statutory Filings and Contributions Process:

• Tax Card Subscriptions: Employers must promptly inform the tax authorities of their workforce. The tax card subscription report should include vital details such as social security number (CPR no.), employee number, start date, and the type of tax card (main or secondary). The report must adhere to the specified fixed format.
• Tax Card Collection: When applying PAYE, employers are required to use the employees’ personal tax cards, which can be collected from SKAT. The collection process follows a predefined fixed format.
• E-Indkomst Tax Reporting: Employers are obligated to report income, tax, social security, pensions, etc., on a monthly basis. Post-reporting, a reconciliation process ensures accuracy and compliance with regulatory standards.
• Absence Statistics: Membership in DI or DE mandates the reporting of absences for a full year. Alternatively, non-members can submit their data to Danmark Statistik, using specified reports to fulfill this obligation.
• Salary Statistics: Similar to absence statistics, DI or DE members must report salary statistics for a full year. Non-members can opt for submission to Danmark Statistik, following the same reporting procedures.

These processes collectively contribute to maintaining transparency, adherence to legal requirements, and a streamlined payroll system for employers in Denmark.

Payroll Taxes in Denmark

Navigating the Danish payroll tax landscape is a crucial aspect of managing a business or workforce in the country. Denmark, known for its transparent and comprehensive tax system, imposes various taxes that employers and employees must navigate to ensure compliance. From income taxes and social security contributions to specific tax reporting obligations, understanding the intricacies of payroll taxes is essential for businesses operating in Denmark. This guide provides valuable insights into the key elements of payroll taxes, offering a comprehensive overview for employers, HR professionals, and anyone involved in managing payroll processes in Denmark.

Social Security Contributions

• ATP: Pension contributions made by the employer. DKK 2,272 per year. 
• AUB: Contributions from employers that fund apprenticeships and vocational training, also known as Reimbursement System. DKK 2,791 per year.
• AES: Contributions from employers towards occupational injury and disease. 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: Employers are obligated to contribute to the maternity fund. DKK 1,350 per year.
• Payment during holidays or holiday allowance (in Danish: “Feriepenge”): Hourly-paid employees are entitled to holiday allowance paid quarterly into FerieKonto (monthly for hourly-paid employees). 12.5% of the employee’s salary. Monthly paid employees, who are entitled to compensation during sickness, get paid holiday instead of holiday allowance (in this case allowance becomes 1% of wages). The 1% holiday allowance is paid once a year in May (the payment of holiday allowance for monthly paid employees happens two times a year, one in May and one in August) –
• AFU: The Danish Labor Market Fund for Posted Workers ensures employees posted to Denmark receive wages owing to them. DKK 48 per year

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.

Payroll Outsourcing in Denmark – Why to Outsource Payroll to Mercans

In our commitment to delivering unparalleled payroll services, our firm utilizes a cutting-edge tool that spans across multiple countries, ensuring regional uniformity and compliance with stringent standards. Our chosen tool adheres to the following key requirements:

• High Safety Standards: Prioritizing the security of sensitive data, our tool implements high safety measures to protect your payroll information.
• Adequate and Sustainable Performance: We guarantee consistent and sustainable performance to meet the dynamic demands of your payroll needs, ensuring reliability in every aspect.
• Flexibility and Scalability: Designed to evolve with your business, our tool offers flexibility and scalability to adapt to new requirements seamlessly, accommodating growth and change.
• Cloud Collaboration: Embracing the advantages of cloud technology, our tool facilitates collaborative work, providing accessibility and convenience for your team, regardless of geographical locations.
• ISO 27001 and ISAE3402 Certifications: With ISO 27001 and ISAE3402 certifications, our tool undergoes rigorous testing and auditing processes, assuring you of the highest standards in information security and service quality.
• Efficient Human Resources Management: Streamlining payroll settlement processes, our tool enhances the efficiency of your human resources area, saving valuable time and resources.

Embark on a journey of payroll excellence with our firm, where cutting-edge technology meets the highest industry standards to elevate your payroll experience.

Employee Benefits in Denmark

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.

Payroll Solutions in Denmark

Embark on a journey of streamlined payroll excellence tailored for Denmark with Mercans’ Global Payroll Solutions. Our versatile models not only ensure local compliance but also facilitate seamless integration with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. Experience the simplicity of accurate payments with Mercans by your side.

Explore Our Tailored Models

• SaaS (Software as a Service): Tailored for enterprises managing multi-country payroll with intricate complexities arising from diverse data points, locations, currencies, and languages. Our SaaS model optimizes operations for peak efficiency, ensuring a smooth payroll experience.
• Managed Services: Specifically designed for mid-sized and large enterprise businesses operating multi-country payroll. Our Managed Services model provides on-demand HR expertise, guaranteeing security, reliability, and compliance across the board.
• HRMS (Human Resource Management System): Ideal for mid to large businesses in expansion mode, our HRMS model offers a comprehensive range of functionalities, including payroll and benefits. Businesses can choose the specific features they need, ensuring a tailored and efficient solution.

Mercans brings you payroll solutions that transcend boundaries, delivering customized excellence to meet the unique needs of your business in Denmark and beyond. 

Mercans’ Technology, Integrations and Recognitions 

Mercans takes the lead in providing outstanding payroll services in Denmark, presenting a versatile range of tailored solutions to align with the distinct needs of our clients. Choose Mercans as your reliable partner, ensuring a smooth and effective payroll process in Denmark’s dynamic business landscape.

• Technological Advancements: Embark on the frontier of innovation with Mercans’ state-of-the-art technology, driving our global payroll solutions. Dive into the details of our technological prowess here.
• Seamless Integrations: Effortlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing overall efficiency and connectivity. Uncover the potential of integration here.
• Recognized Excellence: Align with a partner distinguished for excellence. Mercans has garnered acclaim for its unwavering commitment to delivering exceptional payroll services. Explore our awards and recognitions here..

Start Working with Payroll Company in Denmark

In the dynamic realm of business opportunities, Denmark shines as an outstanding destination, boasting a rich cultural heritage, economic vitality, and strategic access to Europe. With a thriving market, diverse industries, and a skilled workforce, Denmark offers an enticing environment for business expansion. Within this context, Mercans emerges as the premier choice for navigating the complexities of the Danish business landscape.

Our unwavering commitment to 100% local compliance, profound knowledge of Danish labor laws, and a comprehensive range of services position us as the ideal partner for businesses seeking to establish a successful presence in Denmark. Opting for Mercans allows businesses to harness our expertise, ensuring seamless operations, compliance with statutory requirements, and a robust foundation for growth in this dynamic and promising market. With Mercans as your trusted ally, embark on a journey of success and prosperity in the heart of Scandinavia.