Hiring a Remote Worker in Denmark Using an Employer of Record (EOR)

Expanding your business into Denmark offers numerous benefits, from accessing a highly skilled local workforce to leveraging the country’s strong economic environment and robust infrastructure. Denmark is known for its exceptional quality of life, progressive labor market, and innovation-friendly policies, making it an attractive destination for business growth. Whether you are looking to hire Danish citizens or international talent, understanding the local employment regulations is crucial.

But, what if we told you Denmark’s employment regulations are set to change?

That’s right! If you’re looking to hire in Denmark, here’s what you need to know about the upcoming changes to employment regulations:

The Danish Parliament has passed a new bill, set to take effect on July 1, 2024, that will significantly impact employer obligations. Employers must implement an “objective, reliable, and accessible” system for recording daily working hours by the deadline. This system should cover daily hours worked, provide individual access for employees, and retain records for at least five years in compliance with the 48-hour rule.

Additionally, while employers are required to track daily working hours, they need not record the exact times of day. There are also provisions for self-organizer exemptions, which must be finalized and reflected in employment contracts before the July 1 deadline.

For those looking to streamline this process, Mercans’ Employer of Record (EOR) services can ensure seamless compliance and efficient management of your workforce in Denmark.

Hiring Your First Employee in Denmark?

Whether you’ve just hired your first employee or are planning to do so, understanding the process of reporting pay and deducting taxes is crucial. Below are the key steps to consider:

Before You Submit Your Report:

Register as an Employer: at virk.dk

This step involves registering your business as an employer with the relevant authorities in Denmark. Virk.dk is a government website where businesses can complete various administrative tasks, including registering as an employer. By registering, you officially notify the Danish authorities that you will be hiring employees and are prepared to fulfill your obligations as an employer, such as paying taxes and providing benefits.

Access E-Income: Use E-tax for businesses to access E-income.

E-income is an online platform provided by the Danish Tax Agency (Skattestyrelsen) for reporting employee income and tax deductions. To access E-income, businesses must use the E-tax for businesses (TastSelv Erhverv) portal. This portal allows businesses to manage their tax affairs online, including reporting income, paying taxes, and accessing relevant forms and resources. By using E-tax for businesses, employers can submit their payroll information accurately and efficiently, ensuring compliance with Danish tax laws and regulations.

After registration, you can choose to report pay directly to E-income or opt for assistance from a payroll bureau or accountant.

When it comes to reporting pay, there are several options to consider:

• Payroll Bureau Services: Simplify your bookkeeping and reporting tasks by outsourcing them to a reputable payroll bureau. These specialized services offer documented bookkeeping and ensure compliance with local regulations, saving you time and effort.
• Professional Accounting Assistance: Engage a qualified accountant to handle your reporting and bookkeeping needs. With their expertise, accountants can provide tailored solutions and ensure accurate financial management for your business.
• Self-Managed Reporting: Alternatively, you can choose to handle payroll reporting yourself through E-income, a cost-effective option. While this method is free, it requires time and effort to learn the system and manage monthly reporting and payments effectively.

Regardless of the approach you choose, it’s crucial to deduct A-tax and labor market contributions from your employees’ pay accurately. Additionally, providing detailed monthly payslips to your employees, outlining their earnings, deductions, and entitlements, is essential for transparency and compliance.

At Mercans, we understand the complexities of payroll management and offer comprehensive solutions to streamline your reporting processes, ensuring compliance and peace of mind. Learn more about Payroll Services in Denmark.

Ensuring Payroll Transparency & Payslips for Your Employees

As an employer, ensuring proper payroll management is crucial, and at Mercans, we understand the importance of providing comprehensive payslips to your employees. Each month, it’s essential to furnish your workforce with detailed payslips, reflecting transparency and clarity regarding their earnings and deductions. Payslips should include vital information such as the employer’s name, address, and business registration number, along with the employee’s details like their civil registration number and any employee identification number. Additionally, payslips should outline the pay period, gross salary before tax deductions, A-tax and labor market contributions deducted, hours worked, pension contributions, net salary after deductions, details of tax cards and withholding rates, holiday pay, and any other entitlements such as transport allowances. By adhering to these standards, not only do you ensure regulatory compliance, but you also foster trust and transparency within your workforce, demonstrating your commitment to their financial well-being and security.

Contributions to the labor market and taxes

Deductions for A-tax and labor market contributions are mandatory from your employees’ pay. Additionally, it’s crucial to consider other factors, such as family members working within your business and the absence of a statutory minimum wage in Denmark, where wages and employment terms are typically governed by collective labor agreements established by trade unions and employer associations.

• Work Contract: Always obtain a comprehensive work contract from your prospective employer, whether it’s a Danish company or a foreign entity. The contract should include essential details such as the names and addresses of both parties, the location of employment, job description, commencement date, duration of employment, notice periods, salary details, entitlements like paid holidays and sick pay, working hours, and other relevant terms and conditions. Saving a copy of your employment agreement is essential, as it outlines your rights and obligations. If you have any concerns regarding the contract, don’t hesitate to seek clarification from your employer.
• Residence and Work Permit: Depending on your nationality, you may need to acquire a residence and work permit to work legally in Denmark. While Nordic citizens can work without a permit, EU/EEA citizens can travel freely for work, but may need a tax card if staying for more than three months. Non-EU/EEA/Swiss citizens must obtain a residence and work permit before starting employment in Denmark.
• Health and Safety: Adherence to the Danish Working Environment Act is mandatory for all employees working in Denmark. Employers are responsible for ensuring safe working conditions and providing necessary instructions and protective equipment. Certain professions require professional qualification recognition, and cooperation on safety and health is imperative.
• Insurance: Employers must acquire employer’s occupational accident insurance to cover employees during work hours. Consider private household insurance for additional liability and accident coverage outside of work hours. Unemployment insurance is voluntary but recommended, and joining a trade union can provide assistance in disputes over pay and working conditions.

Tax obligations: Must be fulfilled promptly, with tax rates depending on various factors, including employment conditions and deductions. Failure to declare taxes is considered a criminal offense, resulting in penalties and charges.

In Denmark, the tax structure encompasses four distinct levies on employment income: state tax, municipal tax, labor market tax, and church tax—where the latter is discretionary. Additionally, social security contributions for both employees and employers remain relatively low.

Advantages of Choosing Mercans as Your EOR in Denmark

• Compliance Assurance: Mercans specializes in ensuring comprehensive compliance with Danish employment laws, offering peace of mind for companies navigating the intricate legal landscape of Denmark. This expertise significantly reduces the risk of legal penalties or disputes arising from non-compliance, safeguarding your business interests.
• Streamlined Market Entry: Establishing a legal entity in a foreign country can be complex and time-consuming. Mercans streamlines this process, providing a hassle-free solution for companies to onboard local talent without the need for physical presence, making it an ideal choice for companies exploring the Danish market.
• Efficient Payroll Administration: Mercans manages all facets of payroll administration, including precise tax calculations and social security contributions. This not only ensures adherence to regulatory requirements but also alleviates the administrative burden on your company, allowing you to concentrate on core business operations.
• Tailored Benefits and Employee Retention Strategies: In Denmark’s competitive job market, offering competitive salaries alone may not suffice. Mercans assists in designing and implementing attractive benefits packages tailored to Danish professionals’ preferences, such as comprehensive health coverage, generous vacation allowances, and flexible work arrangements, aiding in talent attraction and retention.
• Local Cultural and Market Insights: Benefit from Mercans’ in-depth knowledge of Danish culture and business norms, providing invaluable insights for refining business strategies and fostering effective employee interactions. With Mercans, aligning your operations with local expectations and market nuances becomes seamless, enhancing your business’s success in Denmark.

Conclusion

In conclusion, partnering with Mercans as your Employer of Record (EOR) in Denmark offers a myriad of benefits that ensure a smooth and successful expansion into the Danish market. From ensuring robust compliance with local employment laws to providing streamlined market entry solutions, efficient payroll administration, and tailored benefits packages, Mercans empowers companies to navigate the complexities of the Danish business landscape with confidence. With our deep understanding of Danish culture and market dynamics, Mercans is your trusted ally in driving growth and success in Denmark.

To explore these advantages further and discover how Mercans can support your business expansion into Denmark, visit https://mercans.com/employer-of-record/denmark/ solutions today.