Hire Contractors In Denmark

In a recent survey conducted by the World Bank, Denmark secured the first position in Europe and fourth position in the entire world for ease of doing business. 

But what makes this country so great? One main reason is its well-educated workforce. The Danish work culture is characterized by a flat hierarchical structure and a team-oriented approach, wherein employees play active roles in problem-solving. 

This, when coupled with Danish citizens' high level of education, makes them capable of handling all tasks, even those that are elsewhere reserved for management.

Additionally, Denmark is among the top countries in the world known for its English proficiency. This reduces the chances of miscommunication, meaning that you no longer have to worry about decreased productivity or ineffective teamwork at your organization.

In this article, we will discuss, how to hire and pay contractors, some of the challenges frequently faced by businesses that wish to hire contractors in Denmark and how you can successfully make your way out of them.

How to Hire Contractors in Denmark

The traditional approach to hiring a Danish contractor is to set up a subsidiary company, register your business, source skilled workers, shortlist potential employees, and onboard them. 

However, this process is extremely time-consuming, not to mention very expensive and resource-intensive. You will need to build an in-house team of HR professionals to help with the onboarding process, a legal team to decode the labor laws, and a payroll mechanism to disburse payments to your contractors.

The worst part? You will need to oversee everything and ensure there is no room for any legal mishaps. 

Hiring Contractors Through Skuad AOR

Partnering with a Danish agent of record, such as Skuad, is an easy way to avoid all the complexities mentioned above. 

Our comprehensive platform features everything you need to smoothen your international hiring journey. These include,

• An in-house team of legal experts who can provide top-notch guidance on the labor and tax regulations of Denmark.
• Bullet-proof data privacy and security
• Built-in IP system to safeguard your company under the IP laws of Denmark and more.

Best Ways to Pay Contractors in Denmark

While paying contractors in Denmark directly through bank transfers, paper checks, or international money orders is a popular method, it has several disadvantages. 

Firstly, you will be in charge of managing paperwork related to taxation and deductions. Secondly, you will need to be aware of the currency exchange rates and the frequency of payments under Danish labor laws. 

With the advancement of technology, many companies have switched to a different mode of payment, that is, through an agent of record in Denmark or a contractor software, such as Skuad. 

Skuad’s global payroll solution carries tremendous benefits for an organization. They include, 

• Automated invoicing and payments: reduced chances of manual error.
• Built-in payroll compliance: minimal risk of non-compliance and
• Multi-currency payroll: no headache of juggling multiple banks.

Hiring Contractors Directly vs Hiring Contractors via Skuad

If you are still unsure of how to hire an independent contractor in Denmark, then take a look at this detailed comparison between the two most predominant methods of recruitment.

Cost of Hiring Contractors in Denmark

If you’re thinking - ‘how much does it cost to hire a contractor in Denmark?’

The cost of hiring contractors in Denmark can vary greatly depending on factors such as the individual's experience level, the nature of the work, or even the industry in which your business operates. 

Let’s say that you are looking to onboard a contractor for a project that requires special expertise in the field of healthcare. In that case, you can expect an hourly rate of DKV 184 per hour. On the other hand, if you wish to hire a finance assistant, the cost will be lower since they usually charge around DKV 160 per hour.

Similar to this, the cost of hiring contractors in Denmark will also differ depending on the experience level. Someone who has worked as an independent contractor for many years and has enough experience in their respective fields will demand a higher rate than an individual who has just started freelancing.

How to Convert a Contractor into an Employee in Denmark 

Converting from contractor to employee salary is a quite common task in Denmark.

Below, we have highlighted some of the most essential steps involved in converting a contractor into an employee in Denmark.

• Research all the relevant labor and tax laws in Denmark.
• Review the changes you need to make to the current hiring strategy.
• Discuss the work hours, salary, and benefits with your contractor.
• Draft an employment contract that follows all the guidelines of the Danish labor laws.
• Once your contractor-turned-employee has signed the agreement, run a thorough background check to avoid any discrepancies.
• Onboard the new employee to your organization and add them to the existing payroll mechanism.

Challenges of Hiring Contractors in Denmark

While Denmark is undoubtedly a great destination for hiring contractors, like Copenhagen contractors, there are a few obstacles that hinder a smooth recruitment process. They include,

The Danish Labor Law and its Regulations

The Danish employment laws are complicated, to say the least. They comprise various rules and regulations that often get confusing for you to understand, especially if you lack the necessary legal expertise in your organization. 

For example, under this country's labor laws, all employers must provide workers with employment contracts. Various employment agreements can exist, such as full-time, part-time, temporary, and project work. 

Additionally, some independent contractors work on a consulting basis. In such cases, you have to divide the person’s services among tasks. 

However, please note that, in this scenario, the employer will not be obligated to provide the freelancer with mandatory employee benefits, such as sick leave, maternity leave, and so on. 

In fact, more often than not, it is the duty of the independent contractor to provide work equipment/office themselves. 

Investing in a robust contractor management system can prove to be beneficial if you want to hire contractors in Denmark. Unfortunately, it can be quite expensive, especially on a limited budget. 

The Danish Tax Requirements for Contractors

The Danish tax system is complicated and involves various rules and laws. Everyone who lives and works in Denmark (both full-time employees and independent contractors) and has an income is liable to pay tax. 

The general rule for employees is that the employer handles all the taxes, as per the PAYE (Pay As You Earn System). This means that they calculate the taxes on behalf of the employee and send them a net wage. 

However, this rule does not apply to independent contractors. Due to their short stay with the employer, the contractors have to file and pay their own taxes. This increases your responsibility as an employer to ensure that all the different requirements are diligently met by your workers to avoid potential liabilities. 

According to legal guidelines, there are three types of tax cards that must be obtained. They include,

• Primary tax: It highlights the withholding rates, deductions, and allowances individuals are entitled to for the upcoming tax year.
• Secondary tax card: It is typically used by individuals who have more than one job. 
• Tax exemption card: It is provided when individuals are not taxed on their pay as long as it does not exceed a certain amount.

Understanding these different requirements for contractor payments can be very confusing, especially when you are hiring more than one contractor at a time. Seeking the help of an agent of record in Denmark can prove beneficial, but it, too, comes with its own share of fees and service charges. 

Complying with Intellectual Property Rights

Under Danish IP laws, an independent contractor or freelancer is, by default, the owner of any original work they create. This can include anything from designs and codes to videos or animations. 

Therefore, when collaborating with self-employed individuals in Denmark, you need to have a contractual transfer of ownership by the worker. The good news is that doing so will free you from potential legal obstacles, such as infringement investigations or criminal and civil liability. 

However, the downside to this is that the transfer might not be as easy as it seems. In addition to fully understanding the IP requirements in Denmark, you will need to establish a proper written agreement. This document must explicitly define the specific works, the scope of transfer, and the territorial scope.

To manage all these tasks, you need to hire a team of legal experts or use contractor software. However, both these solutions come with hefty expenses.

Hire Contractors in Denmark with Skuad

Skuad’s all-inclusive platform, with its innovative and customized solution, makes the global employment journey seamless. The best part is that with Skuad, you do not have to establish a separate entity in Denmark, meaning no extra expenses or delays in the hiring process.

Some of the most amazing features of Skuad include onboarding any new hires within minutes, 100% compliance with local employment laws, one-click global payroll, and more. 

If you, too, wish to avail these benefits, book a demo with us today!

FAQs

1) Can I hire an independent contractor from another country?

Yes, you can hire international contractors. It is a great way to increase your business’ flexibility while reducing costs usually associated with hiring full-time employees. 

2) What is the contractor tax in Denmark?

Denmark residents are subject to various taxes, such as state taxes (12%- 15%), municipal taxes (25%), and labor market taxes (8%).

3) Can you work without a contract in Denmark?

No, under Danish labor laws, all employers are mandatorily required to provide their workers with an employment contract that will specify the conditions of their employment.

4) How do I pay a foreign contractor?

One of the best ways to pay an international contractor or the cheapest way to pay contractors USA to Europe is through an agent of record, like Skuad. It is a unified platform that enables you to easily hire, onboard, and pay contractors from anywhere in the world. We feature fantastic solutions for all your hiring needs, such as automated invoicing, multi-currency payroll, and real-time reporting.