Employer of Record in Denmark

Known for its high living standard, progressive culture, and spirit of innovation, Denmark offers businesses some of the best talent in the world. Their work culture emphasizes team spirit, flexibility, and strong employee protections. 

For owners and entrepreneurs who want to take advantage of increasingly globalized workforce options, working with an employer of record in Denmark can simplify the hiring process. An EOR provides access to a wealth of excellent employee options without the hassle of actively managing international hiring and compliance.

Follow along as we detail the process of working with an employer of record in Denmark and review some valuable features of Skuad’s EOR software.

Denmark at a Glance

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

Employment in Denmark

What You Must Know Before Employing in Denmark

Danish employment is based on the European concept of “flexicurity” (i.e., “flexibility” + “security”) which means that: 

1. All members of the working population have access to employment.
2. Employees are free to participate in welfare programs and are given benefits in case of unemployment.

This affords Danish employees the freedom to be selective about the work they take on, which makes it all the more important to ensure that your company has the resources for appropriate onboarding and management.

Denmark has three main employment categories:

While all adhere to Danish employment and labor laws, each category has its own specific laws and RAE/labor unions to consider, especially for hiring in bulk.  

The most important laws to consider as an employer of record in Denmark are:

Hiring in Denmark

Over the past few years, online hiring and widespread internet access have made the process of recruiting new candidates a more standardized process across different countries. Most HR teams follow these steps:

1. Develop a job description.
2. Post it on one of several job portals and third-party job boards (as well as the company site). 
3. Review applications.
4. Interview candidates.
5. Background checks.
6. Final negotiations.

Being an employer of record in Denmark requires processing a large number of qualified candidates for posts, which can be overwhelming for your HR team. This is why having an EOR partner like Skuad is essential, because we help you hire candidates, develop contracts, onboard, and manage all other employment-related activities.

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.

1. Choose the type of business you want to establish, whether a partnership, completely private, or public.
2. Choose a unique name for the subsidiary.
3. Register the company with the Danish Business Authority. Here, you will receive your CVR number.
4. If you sell goods or services above a certain revenue threshold, you must also register for VAT.

Employer of Record in Denmark

Having an EOR (Employer of Record) solution can help your business grow in Denmark without requiring a separate legal entity. An EOR partner like Skuad ensures a smooth business expansion by leveraging a strong network of local sources and experts on Danish employment and labor regulations.

Through our local network and global infrastructure, Skuad can undertake activities such as: 

• Hiring
• Contract/Payroll Management
• Onboarding
• Employee Record Management

An EOR solution tackles the heavy lifting for you, allowing your organization to pay more attention to mission-critical tasks and freeing up the team to provide the best possible service/product.

Learn more about Skuad’s customized EOR solutions.

Onboarding & Agreements

What is onboarding/How to onboard

The onboarding process welcomes new employees, explains their roles and responsibilities, and introduces them to your corporate culture. Here’s a guide on how to onboard the employees you’ve hired through Denmark EOR services: 

1. Introduce the new employee to the company and colleagues. 
2. Brief the employee about the responsibilities of the role for which they were hired.
3. Provide necessary job materials and logins required to execute tasks. 
4. Complete employee training.
5. Check-in regularly to ensure safety and evaluate initial job performance.

Onboarding checklist

Keep this checklist handy while onboarding an employee hired through an employer of record in Denmark:

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

Employment agreements in Denmark

There are four distinct employment classifications in Denmark:

Misclassification is one of the most common mistakes employers make when expanding into a new country, but using an employer of record in Denmark ensures accuracy and adherence to local laws. Having an EOR like Skuad allows you to avoid misclassifications through automated processes and dedicated teams.

Visa Types in Denmark

Payroll & Taxes in Denmark

Taxation is one of the most important areas in which an EOR partner can offer the greatest help. They can assist with your payroll setup and ensure that your company contributes the appropriate share of taxes. 

Setting up payroll in Denmark requires thorough compliance with local laws and regulations. This includes incorporating all the benefits and provisions you are legally bound to provide your employees.

How to pay employees in Denmark

For employees hired through an EOR, they take full responsibility for payroll in Denmark. 

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

Employers can make payments by following these steps:

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

Best ways to pay employees in Denmark

Employers may decide on a Danish minimum wage for the sector based on the agreement between the employer and employees hired through an EOR. 

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

Taxation in Denmark

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. 

Other tax contributions and incentives

Additional taxations under the Danish tax system are as follows:

• Social Security Contributions: The ATP Livslang Pension in Denmark is a social security contribution under which employers and employees contribute their shares. When employees reach the age of state retirement, their contribution to ATP will automatically be paid to them. 
• VAT: VAT (value-added tax) is an indirect tax that Danish residents pay when purchasing goods and services. The standard VAT rate in Denmark is 25%. 
• State tax: Employees pay a part of their taxes to the state. 
• Municipal tax: Employees also pay a percentage of their income for 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 tariff helps to raise awareness and safeguard natural resources.

Learn more about how Skuad can simplify managing Danish employees for your business. 

Talk to our teams here

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 the minimum wage or look up the minimum pay in Denmark for a specific role, use Skuad’s salary insights tool.

Employee benefits

Employees hired through an employer of record in Denmark enjoy several benefits, the most common of which we list below: 

• Accommodation and free meals.
• 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 costs.
• Credit card plans.
• Newspapers 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 maintain occupational accident insurance, which protects them in case of an accident during working hours. 

Unemployment insurance: Employees who lose their jobs may receive 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

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

The security and well-being of Danish employees are ensured by several employment laws, as listed below:

Fines/Penalties

In Denmark, the rights of employees hired through an EOR are protected by a framework of guidelines outlined by various laws. Breaching any of these laws can cause an employer to be penalized, for which they must compensate employees. 

IP protection

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

Workers’ Rights

Employees are protected by various pieces of legislation, but the important core takeaways are as follows: 

• Work permits: People who do not reside in EU countries, especially the Nordic countries, must apply for a separate work permit to work in Denmark. This work permit is applied once you have a job offer. For indefinite employment, the work permit is granted for a maximum of four years and is renewable. For other types of work, a permit is granted for three months at a time. 
• Working hours: The standard workweek is 37 hours, but may be adjusted through agreement. Employees are entitled to at least 11 hours of rest between workdays. 

• Minimum wage: There is no minimum wage in Denmark. Instead, wages are mutually determined through the flexicurity model (flexibility plus security), which enables dialogue between labor unions and employer associations.
• Scope of negotiating terms: Discussions about compensation for a role are generally considered a fixed step at the end of the recruitment process. Note that the higher the corporate ladder or hierarchy, the greater the employee leverage. 
• Trade unions: Employees have the right to join a trade union, which can assist them if working conditions become unfavorable. 

Notice period

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

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

Severance pay

Employees receive severance pay equal 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

1. The workplace should be devoid of offensive behavior like sexual harassment, threats, physical violence, bullying, etc. 
2. The workplace should provide healthy psychological work conditions for employees, which can impact their mental and physical well-being.
3. The workplace should have the optimum temperature, preferably between 20 and 22º Celsius (68 - 71.6º F), adequate ventilation, proper lighting, noise cancellation, etc.

Anti-discrimination laws/acts

Denmark's laws prohibit workplace discrimination 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.

To learn more about workers' rights in Denmark and how Skuad can secure them for you, speak to Skuad experts today and kick-start your expansion journey.

Remote & Hybrid Work

Remote work was on the rise in Denmark long before it was introduced or started gaining traction in other parts of the world. 

This – plus the fact that Denmark's Internet and telecommunication connectivity covers nearly the entire country – make this area prime for recruiting, hiring, and onboarding remote workers.

Flexible work arrangement

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

Technology and infrastructure requirements

Employers and employees both contribute to an environment that supports remote work:

Meanwhile, 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 offer obligatory employee leaves, as listed below.

• 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

Dates of holidays and observances may change based on religious calendars.

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

Maternity and paternity leave

Employees in Denmark are eligible for the following, dependent on sex

Maternity benefits require 120 work hours over 13 weeks with a salary, depending on employer agreements.

Background Checks

An Employer of Record must perform thorough background checks before hiring employees. 

The following are routinely screened during background checks in Denmark: 

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

An EOR in 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 structure than a hierarchy, which helps maintain smoother communication within the organization, but can also confuse the decision lines.
• Danes believes in teamwork and collaborating effectively to execute work projects. 
• Their mode of communication is relatively informal. They also do not follow a formal dress code for work.

Probation & Termination

Because access to unemployment benefits is easier to obtain than in other European Union countries, employees in Denmark generally have no protection from dismissal. Similarly, the employer is not required to inform trade unions or employment agencies of their termination. Exceptions include: 

• If the employee is covered by a fair dismissal clause in their contract or a provision of the Salaried Employees Act.
• If the employee is on parental leave.
• If the employee is a member of certain minority groups/communities.
• If the employee is the elected representative of a union.

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

Offboarding 

While employers aren’t required to notify employees of termination in writing, employees can request written notice for documentation. 

The same applies to employee resignations. 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 a similar menu of services:

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’re looking to work with a trusted partner to take care of your HR needs, an EOR partner like Skuad has deep wells of expertise in the labor and employment laws of Denmark. 

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

FAQs

What is an Employer of Record in Denmark?

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

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.

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.

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 Danish labor laws. Using EOR services in Denmark helps you manage these contributions efficiently, simplifying global payroll and maintaining adherence to local regulations.

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.

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.

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.

How do I choose an employer of record?

To choose an EOR in Denmark, you must assess 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.