Denmark

Employer of Record in Denmark

Denmark, known for its innovation and high quality of life, attracts international talent and businesses. 

In this era of globalization, Denmark possesses a dynamic environment that draws both students and experienced professionals.

The employment rate in Denmark has skyrocketed from 62.4% in 2013 to 68.4% in 2023, opening doors to exciting opportunities for skilled professionals from around the globe. 

The unique work culture of Denmark emphasizes team spirit, flexibility, and employee protection. 

An Employer of Record (EOR) in Denmark provides essential support to navigate this complex landscape. 

A Denmark EOR is like a third-party body that handles the complexities of international hiring, allowing businesses to focus on growth.

The average Danish salary is around 38,854 DKK per month before Denmark salary taxes. So, figuring out the right salary for both employer and employee is crucial for a successful relationship. 

That's where Skuad's cost calculator comes in handy. It helps you determine the budget for hiring Danish employees and the exact compensation package to ensure everyone is on the same page.

Denmark at a Glance

• Population: 5.9 million 
• Currency: DKK Danish Krone
• Capital: Copenhagen
• Languages spoken: Danish, English‍
• GDP: USD 404.2 billion‍

Employment in Denmark

What You Must Know Before Employing in Denmark

Employment in Denmark is based on the European concept of flexicurity, which means flexibility with security. 

Like other European economies, the employment system in Denmark is highly flexible. All members of the working population have access to employment. 

Denmark’s labor force comprises nearly 50% of the Danish population (a higher percentage than most other countries). 

Danish employees are free to participate in welfare programs and are given benefits in case of unemployment.

Denmark's three main types of employees are white-collar, blue-collar, manager, and self-employed. 

While some common laws and regulations apply to all three categories, several specific laws exist for each.

Danish employment and labor laws apply to all workers employed in Denmark. Rae and labor unions are also active and prominent in Denmark. 

You should engage with these unions if you want to hire in bulk.

Knowledge of labor and employment laws in Denmark can give companies a significant edge over the competition and expedite the expansion process. 

Connect with Skuad to learn more.

Some of the provisions of Employment Laws to note before hiring in Denmark are as follows:

Hiring in Denmark

Over the past few years, the process of recruiting new candidates has become almost similar across countries. The main reason for this has been the proliferation of access to the Internet and of hiring candidates online. 

A swarm of job portals on the Internet and social media websites help companies hire candidates. In Denmark, too, many websites contain repositories of candidates for HR teams to sieve through and find the best person for the job.

The first step toward hiring a candidate is developing a job description. As easy as this might seem, the HR team and the team that needs to hire a candidate come together over days to develop the perfect job description for a role. 

Once the job description is ready, it is posted on the careers page of the company website, job portals, and professional websites like LinkedIn.

Next, the HR team will review the applications it has received. This may be done as applications come in, known as rolling review, or once the submission deadline is over. After the initial screening, the shortlisted candidates are invited for further rounds of the hiring process.

If the number of shortlisted candidates is high, companies will generally choose to administer a written test as the first round. The candidates selected after the written test will then move on to interview rounds. 

These may include technical interviews and interviews with HR teams and senior management. For higher posts, the number of formal interviews will typically be lower.

Finally, the HR team requires the last few candidates to undergo a background check. After a round of negotiations, the candidate will be hired.

There are several advantages to hiring candidates using online portals. The greatest advantage is that the HR team does not need to step outside the office to hire candidates. 

Candidates virtually approach the company themselves instead of the HR team having to scout them. Thus, the cost of hiring a candidate is drastically reduced. 

However, a major disadvantage of hiring candidates online in Denmark is that due to the sheer number of candidates who are qualified for posts, the HR team can often be completely overwhelmed with applications.

This is why having an EOR partner such as Skuad is essential in Denmark. Skuad helps you hire candidates, develop contracts, onboard, and manage other hiring-related activities. 

To know more about the hiring process in Denmark, connect with Skuad experts today!

Incorporation: How to Set Up a Subsidiary in Denmark

Opening a subsidiary in Denmark is surprisingly simple and short if you follow the law. The steps to set up a subsidiary are as follows.

• Choose the type of business you want to establish, whether a partnership, completely private, or public.
• Choose a unique name for the subsidiary.
• Register the company with the Danish Business Authority. Here, you will receive your CVR number.
• If you sell goods or services above a certain revenue threshold, you must also register for VAT.
• You can now start hiring employees in Denmark!

Pros:

• Denmark's infrastructure is excellent, with many ports and airports facilitating easy transportation.
• A strong education system sets the stage for skilled professionals and attracts global leaders and entrepreneurs.
• Denmark boasts a well-developed telecommunications sector with stable internet services that support business connectivity.

Cons: 

• Entities need approval from MitD to establish a business in Denmark. Opening a bank account is also a time-consuming process. 
• Owners have to be physically present to get documents approved. 

To set up a subsidiary in Denmark and find a bespoke solution for your expansion, get in touch with Skuad experts.‍‍

Employer of Record in Denmark

Skuad's Denmark EOR (Employer of Record) solution helps your business expand into Denmark without needing an entity setup. 

Our unified and automated global HR platform enables you to expedite the onboarding of your remote team and manage their payroll, benefits, etc., compliantly. 

We help you streamline the global expansion process with the assistance of our international network.

Skuad provides you access to the best Danish talent at all experience levels. 

Through its local network and global infrastructure, Skuad can undertake activities such as hiring, management of contracts and payrolls, onboarding, and employee record management so that you can focus on your organization’s core business activities. 

Learn more about Skuad’s customized EOR solutions.

Setting up your business in Denmark involves several obligations. Certain laws and regulations must be followed, and even a single foul step can set your whole process back by several weeks. 

An EOR partner in Denmark can put everything in perspective and ensure the smooth expansion of your business by leveraging its strong network of local sources and expertise in the employment and labor regulations of Denmark.

Remember, when you work with an Employer of Record, you are not just streamlining your recruitment and hiring process. 

You are also saving time and ensuring you can focus on more integral aspects of your expansion. Learn more about the benefits of EOR solutions from Skuad experts.

Onboarding & Agreements

What is onboarding

Onboarding welcomes new employees, explains their roles and responsibilities, and introduces them to the work culture.

How to successfully onboard employees in Denmark

Here’s a guide on how to onboard the employees you have hired through Denmark Employer of Record services: 

• Introduce the new employee to the company and colleagues. Get them acquainted with the Denmark culture and make them feel at ease. 
• Brief the employee about the responsibilities of the role the individual has been hired for. You can also provide them with a guide or a checklist that can give them a head start and allow them to set goals better. 
• Hand them the gadgets and other software logins needed to execute their task. 
• Next, you need to train the new employee. Employees learn better when they are engaged in projects from the very beginning. 
• Ensure employee safety and well-being by checking in regularly. This also helps gauge their performance.
• Take them around the office if it is an in-position job. 
• Provide cultural training for the new employee to avoid cultural clashes and enhance their comfort.

Types of employment agreements in Denmark

• Full-time employment: This is the most common type of employment. This kind of employment corresponds to 37 working hours in a Denmark work week along with 5 weeks of annual leave. 
• Part-time employment: Part-time employees have shorter working durations per week than full-time workers. 
• Temporary or project workers: They are employed for a specific duration of time, which is listed in their employment contract. 
• Freelancers: Here, employers pay the person offering the service on a task-specific basis. They are not entitled to any kind of leave and must provide their offices and equipment needed to accomplish a task.

Onboarding checklist

Keep this checklist handy while onboarding an employee hired through Employer of Record Denmark: 

• Send a warm welcome mail. 
• Plan an orientation for the employee. This can either be in-person or virtual.
• Assign a mentor who can guide the employee through the process. 
• Arrange an introductory session. 
• Discuss the responsibilities that you are expecting the employee to fulfill. 
• Show the employee the new place. 
• Gather feedback on the onboarding process and address any concerns that the employee may be having.

Types of Visas in Denmark

Payroll & Taxes in Denmark

Setting up payrolls in Denmark must be done completely under local laws and regulations. This includes incorporating all the payroll benefits and provisions you are legally bound to provide your employees.

Danish taxation is another aspect that you need to pay attention to. 

Taxes can vary wildly from country to country and are among the most stringently implemented regulations worldwide. 

Taxation is one of the most important factors where an EOR partner can be of great help, aiding you in setting up your payroll and contributing your share of taxes. 

Book a demo with Skuad to gain insight into Denmark's payroll and taxation system.

How to pay employees in Denmark

For employees hired through EOR Denmark, the body takes care of the payroll in Denmark. 

Unless employees suggest otherwise, salaries are paid to an employee’s NemKonto/Easy account. 

To make the payment, an employer has to:

• Acquire the details of the employee. 
• Calculate the amount the employee is eligible to receive based on the hours of service delivered. 
• Calculate the tax deductions on the gross pay and determine the net income. 
• Release the payment.
• Keep a record of the same at the employer’s end.

Best ways to pay employees in Denmark

Based on the agreement between the employer and the employee hired through Employer of Record Denmark, employers may decide on a Danish minimum wage for the sector. 

Salary negotiations are based on annual wage statistics from trade unions. 

Employees may be paid monthly, daily, or hourly, with some sectors offering performance-based bonuses and provisional wages for sales workers.

Payroll Details

Taxation in Denmark

Employer Taxation

Employers are obliged to pay two-thirds of the amount deposited under the Danish Labor Market Supplementary Pension Fund (ATP). The employee pays the remaining one-third.

Employee Taxation

Denmark tax brackets

Social security contributions

The ATP Livslang Pension in Denmark is a social security contribution under which employers and employees contribute their shares. When employees attain the age of state retirement, their contribution to ATP will automatically be paid to them. 

VAT

VAT is an indirect tax that Danish residents pay when purchasing goods and services. The standard VAT rate in Denmark is 25%. 

However, services and commodities like newspapers, books, periodicals, passenger transport, admission to theater, and other cultural services are exempted from VAT.

Other tax contributions and incentives

Following are the other taxations under the Danish tax system: 

• State tax: Employees pay a part of their taxes to the state. 
• Municipal tax: Employees also pay a percentage of their income in municipal tax. The amount varies from municipality to municipality. 
• Church tax: Employees who are members of the Danish National Evangelical Lutheran Church (Folkekirken) must pay church tax. Again, the municipality decides this amount. ‍
• Green taxes: People staying (and working) in Denmark are levied taxes on how much they spend on society’s resources. This is done to raise awareness among people and safeguard natural resources.

Benefits & Compensation

Salary

Employers and employees should agree on payment terms, which must be documented in the employment contract to prevent misunderstandings. 

Denmark's average salary (Median wage Denmark) of employees is approximately 38,854 DKK per month before tax deductions. 

To find out Demark’s minimum wage or minimum pay in Denmark for a specific role, you may use Skuad’s salary insights tool.

Employee benefits

There are several benefits that employees hired through Employer of Record Denmark enjoy. The most common ones are listed below: 

• Accommodation and free food
• Free Telephone 
• Company vehicles or free public transport passes that can be used for work-related commutes or travel between home and work.
• Health insurance that covers treatment cost
• Credit card schemes
• Newspaper to be used for work

Govt benefits

The Danish government provides a state pension, or "Folkepension," to eligible individuals once they reach the qualifying age. The pension amount varies based on the recipient's age, work history, and marital status.

Bonuses

• Although no regulation requires payment of a 13th salary in Denmark, performance-based bonuses are becoming more popular.

Insurance

• Liability or accident insurance: Employees are legally obliged to have occupational accident insurance, which protects them in case of an accident during working hours. 
• Unemployment insurance: Employees who lose their jobs may get unemployment insurance benefits. ‍
• Health insurance: Permanent residents of EU/EEA countries who work in Denmark for at least 9 hours per week are eligible for Danish health insurance. Non-EU citizens staying in Denmark for less than three months are not eligible to register for the health insurance scheme.

Compliance

Legal landscape (Employment laws)

The well-being of employees hired through Employer of Record Denmark is secured by safety nets in the form of labor laws. 

The security and well-being of Denmark’s employees are ensured by several employment laws. 

Some of them are mentioned below:

• The Working Environment Act: ensures safe and healthy working conditions for employees, addressing both physical and psychological wellbeing.  Employers are responsible for resolving issues under the guidance of workers' and employers' organizations, and the Working Environment Authority monitors compliance. 
• Consolidation Act on the Prohibition of Differences of Treatment in the Labour Market etc.: prohibits discrimination in the workplace based on factors like sexual orientation, age, or origin. Any instances of discrimination must be reported to the Board of Equal Treatment.
• Act on the legal rights of temporary agency workers upon assignment by a temporary work agency, etc.: aims to protect temporary workers' rights, ensuring that agencies adhere to legal or agreed-upon conditions for breaks, overtime, rest periods, pay, and holidays.
• Consolidation Act on Equal Pay to Men and Women: Denmark has strict laws that ensure equal payment to both male and female employees. 
• Act on Employees’ Entitlement to Absence from Work for Special Family Reasons: Provide leave for employees in family emergencies, such as caring for a sick family member or responding to an accident.

Employee/Contractor classification

Danish employees have legal protections under the Salaried Employees Act, while contractors receive benefits based on their contracts. 

Temporary workers have rights protected by an Act on the legal rights of temporary agency workers.

Every young person in Denmark goes to university, as education is free for citizens up to graduation. Therefore, the employee pool in Denmark accounts for a rather substantial percentage of the population.

Labor and employment laws in Denmark recognize all kinds of employment. 

Full-time workers in Denmark who work the required number of hours for at least a month are entitled to a contract that extends their benefits and provisions under the Danish Salaried Employees Act.

In addition, part-time, temporary, and agency workers are also recognized in Denmark. 

Under Danish laws, these workers should be accorded the same benefits and provisions as full-time employees. Danish law does not make a significant distinction between these different types of employment.

Fines/Penalties

The rights of employees hired through Employer of Record Denmark are protected by a framework of guidelines enlisted by various laws. Breach of any of these laws can cause an employer to be penalized, for which he has to compensate the employees. 

IP protection

The Danish Consolidated Act on Copyright protects an individual's right to intellectual property. The act grants copyright to creators of artistic works, giving them the sole right to reproduce and distribute their work.

Worker Rights

Work Permits

People who do not belong to EU countries, especially the Nordic countries, must apply for a separate work permit to work in Denmark. This work permit is applied for once you have a job offer. 

For indefinite employment, the work permit is granted for a maximum of four years and is renewable, while for other types, a work permit is granted for three months at a time. 

To know more about work permits in Denmark and how Skuad can secure them for you, speak to Skuad experts today and kick-start your expansion journey.

Working hours

Although Danes are efficient and hard-working, they prefer maintaining a strict work-life balance. This also applies to employees hired through Employer of Record Denmark. 

The standard workweek is 37 hours, but can be adjusted through agreement. Employees are entitled to at least 11 hours of rest between workdays. 

Denmark Minimum wage

There is no minimum wage in Denmark; instead, wages are mutually determined through the flexicurity model, enabling dialogue between labor unions and employer associations.

Scope of Negotiating Terms

Employees hired at any level can negotiate their compensation with their employers. Discussions on the compensation for a role are generally a fixed step of any recruitment process. 

The last round of this process requires the candidates to express their preferences regarding the compensation and benefits.

It is also essential to note that the higher the corporate ladder or hierarchy, the greater the employee leverage. 

Like any other employee force, the number of highly skilled workers for top-level employment is less in Denmark. Companies choose to consider what candidates prefer, especially when hiring for higher positions. 

Call Skuad experts to know more about the specifics of employment types in Denmark.

Specific labor laws

According to the Danish norms, listed below are some of the labor laws in Denmark:

• Work contract: Employees should receive a work contract detailing their name and address, job position, contract type, role description, pay, benefits, leave entitlements, and terms related to Denmark's termination of employment, etc.
• Trade unions: Employees have the right to join a trade union, which can assist them if their working conditions become unfavorable. 
• Tax: Regardless of the type of employment agreement an individual is engaged in, paying taxes is mandatory. Employees should have a tax card that the tax authorities will issue. 
• Wages: Terms related to wages are mutually agreed upon by the employer and the employee. However, the same should be mentioned in the employee's appointment letter. 
• Leaves: Employees in Denmark are entitled to annual leave, public holidays, and other leave like Danish maternity leave, paternity leave, sick leave, and many more.

Notice period

The terms and conditions for the termination of an employee are enlisted in the Danish Salaried Employees Act, also known as Funktionærloven. 

The notice period for employees engaged for different durations is as listed below:

Severance pay

Employees receive severance pay, equivalent to one or three months' salary, depending on their tenure. This payment is made with their final salary. The terms and conditions for severance pay are outlined in the collective agreement, adhering to the Danish Salaried Employees Act.

Working conditions

• The workplace should be devoid of offensive behavior like sexual harassment, threats, physical violence, bullying, etc. 
• The workplace should provide healthy psychological work conditions for employees, which can impact their mental and physical well-being.
• The workplace should have the optimum temperature, preferably between 20 and 22 degrees Celsius, adequate ventilation, proper lighting, noise cancellation, and so on.

Anti-discrimination laws/acts

Denmark's law prohibits discrimination in the workplace based on factors like race, religion, sexual orientation, or age.  Employees facing discrimination can file complaints with the Board of Equal Treatment, accessible via the National Board of Appeals website.

Health & Safety

Employers and employees must follow the Danish Working Environment Act, which mandates employers to ensure safe working conditions and prevent workplace accidents and illnesses. The act also includes provisions for supervisors to maintain health and safety standards. 

Remote & Hybrid Work

Remote work has been on the rise in Denmark long before it was introduced or began to gain traction in several other parts of the world. 

Denmark's Internet and telecommunication connectivity covers nearly the entire country, so there are seldom any issues in setting up remote work infrastructure. 

Hence, when a significant proportion of the world started working remotely, Denmark could hit the ground running, thanks to its world-class infrastructure and foresight.

Flexible work arrangement

Denmark offers a welcoming environment focused on a strong Danish work life balance, with many employers supporting hybrid and remote work options. 

Remote employees receive benefits on par with in-office staff. 

Technology and infrastructure requirements

Denmark should equip both employers and employees with technology that supports remote work. 

Employers must provide necessary devices and software, while employees should maintain a stable internet connection. 

Denmark leads digital transformation across work, private life, and public interactions. 

The National Strategy for Cyber and Information Security 2022-2024 ensures safe ICT operations, providing tools and knowledge to navigate the digital landscape securely.

Timings, Holidays, And Leave Policies in Denmark

Let’s have a look at Denmark’s holidays and leave policy:

Public Holidays in Denmark

Several national and official holidays in Denmark are obligatory leaves for employees. These holidays are as follows.

• New Year's Day
• Maundy Thursday
• Good Friday
• Easter Sunday
• Easter Monday
• Great Prayer Day
• Ascension Day
• Whit Sunday
• Whit Monday
• Constitution Day
• Christmas Day
• Second Christmas Day

Book a Demo with Skuad experts to learn about tailor-made solutions for your business needs.

Maternity and paternity leave

• Female employees in Denmark are eligible for the following:
  • Four weeks of leave before childbirth.
  • Ten weeks of maternity leave after childbirth.
  • Maternity benefits require 120 work hours over 13 weeks with a salary depending on employer agreements.
• If the mother cannot care for the child, the father or co-parent can take 32 weeks of parental leave in Denmark.
• Fathers are entitled to 2 weeks of paid paternity leave post-birth.
• Parents can also take 32 weeks of shared parental leave after maternity and paternity leave in Denmark.
• Adoptive parents are eligible for 32 weeks of leave, which can be shared between both parents.

Background Checks

An Employer of Record Denmark has to perform thorough background checks before hiring employees. 

The following are checked for during a background check in Denmark: 

• Criminal records
• Employment history
• Medical screening
• Education history
• Social media check
• Credit history

EOR Denmark should remember that the background check should be conducted with the candidate's consent. Candidates qualifying for the background check may be eligible for a Visa.

Cultural Considerations

The culture of Denmark as they follow in the workplace is as follows: 

• Denmark follows more of a flat hierarchy. This is both advantageous and disadvantageous. While a flat hierarchy may help maintain smoother communication within the organization, it can also confuse the decision lines.
• Danes believes in teamwork and collaborating effectively to execute a work. 
• Their mode of communication is relatively informal. They also do not follow a formal dress code for work. 

Probation & Termination

There are no specific rules in Denmark regarding the period of probation. However, the probationary period is generally mentioned in the contract negotiated between the employer and the employee. It seldom stretches out to more than six months.

Denmark is among the countries where it is relatively simple to terminate employees, especially compared to other European Union countries. 

Unless the employees are covered by a fair dismissal clause in their contract or a provision of the Salaried Employees Act, there is no protection from dismissal. 

Employers also do not have to inform a trade union or employment agency if they terminate an employee.

One reason termination is simple in Denmark is that access to unemployment benefits is easy to get. 

Certain special protections against termination apply to employees who are on parental leave, belong to certain minority groups and communities, or are elected representatives of a union. 

Book a demo with Skuad to learn more about probation and termination laws in Denmark.

Offboarding 

Employers can warn employees to address performance issues but may terminate employees immediately for serious misconduct. 

While termination doesn't need to be in writing, employees can request written notice for documentation. 

The same applies to resigning employees. Employers should conduct an exit interview with resigning employees to gather feedback and settle dues.

Professional Employer Organization (PEO)

A PEO is very similar to an EOR partner and provides all but the same services. However, one key difference between an EOR and a PEO is that in the case of a PEO, employees are on the rolls of your company, and therefore, you need to take care of all the HR and employee role-related matters. 

However, an EOR partner has employees on their payrolls and takes relatively trivial activities and processes off your plate.

You can trust Skuad’s EOR solution to handle all the compliance and HR-related tasks, from onboarding to termination. Talk to Skuad experts to learn more.

Conclusion

If you are looking to work with a trusted partner who can take care of your HR needs, an EOR partner such as Skuad should be integral to your plans. 

Skuad has deep expertise in the labor and employment laws of Denmark. 

It will also ensure that your HR practices are compliant with the local legal system and that you are never on the wrong side of the law.

Contact Skuad today to give your business expansion plans the much-needed boost!

FAQs

1. What is an Employer of Record in Denmark?

Employer of Record Services Denmark manages all HR Denmark admin and legal employment tasks on behalf of a company, including onboarding payroll, Denmark taxes, and compliance with local labor laws in Denmark. Using an EOR in Denmark allows businesses to hire employees without establishing a regional entity, simplifying global employment and ensuring compliance with Danish regulations.

2. What is the EU employer of record?

An EU Employer of Record (EOR) provides comprehensive employment services across multiple European Union countries. This includes managing localized employment contracts, payroll, tax filings, and compliance with diverse labor laws. Partnering with an EOR streamlines global employment processes, allowing businesses to expand into the European Union without the need to establish a subsidiary.

3. What is the difference between employer of record and co-employment?

An Employer of Record assumes full legal responsibility for employment, including payroll and compliance. Co-employment involves sharing these responsibilities between a Professional Employer Organization (PEO) and the client company. An EOR in Denmark simplifies global employment, while co-employment offers a collaborative approach to managing employees.

4. What are employer contributions in Denmark?

Employer contributions in Denmark include payments for social security, pension, and health insurance. These contributions are compulsory to ensure compliance with Denmark labor laws. Using EOR Services Denmark helps manage these contributions efficiently, simplifying global payroll Denmark and maintaining adherence to local regulations.

5. Should I use an Employer of Record?

Using an EOR can simplify global employment by managing onboarding, payroll, benefits, tax deductions, and more while fully complying with local employment laws. An EOR ensures seamless operations for companies expanding globally without needing a regional entity, making it an ideal solution for international growth.

6. What is the 11-hour rule in Denmark?

The 11-hour rule in Denmark requires employees to have at least 11 consecutive hours of rest within each 24-hour period. This ensures well-being and compliance with labor laws in Denmark.

7. What is the best employer of record?

The best EOR not only helps hire employees in Denmark but also performs all other HR-related tasks, such as managing payrolls, maintaining compliance, following legal procedures, and so on. 

8. How do I choose an employer of record?

To choose an EOR Denmark, you have to look into the following factors: 

• The EOR should be compliant with the country’s labor laws. 
• It should be able to meet all the contractual obligations.
• Check if the EOR provides the services you might be looking for, such as payroll, HR, etc.
• The EOR should offer transparent terms of employment in the contract.